Written Testimony by Nell Hennessy, President, ASA Fiduciary Counselors, Inc. "US West Retirees Threaten to Block Merger" by Andrew Backover, Knight Ridder Syndicate, June 28, 2000; "No Constructive Discharge in Requiring Choice Between Pension and Employment" in BNA Pensions and Benefits, June 5, 2000; "Employ Caution With Company Stock," a column by Jane Bryant Quinn, Washington Post, July 2, 2000; "Participants Waived Right to Escrow Following Merger and Plan Termination," BNA, June 12, 2000. To broadly leverage valuable cloud services, the IT organization might need to become a cloud services broker, creating a structure for cloud governance, security, and service integration to encourage and support cloud services use. The Conference Board Report may give some insight as to why this is true. However, the actions taken to implement these decisions can involve fiduciary standards. These new devices are mobile and connected, letting faculty, staff, and students use computing resources outside of predefined locations and tethered network connections. Change Management and Organizational Restructuring. This can be illustrated by the issues presented to a successor employer with respect to the pre- existing plan of the predecessor. Mr. Shultz stated many people have not counted such service since there were no regulations. She also raised concerns with respect to grandfathering investing formulas in transfers. Some people have an opinion that RCC buildings can last for 50-80 years and hence there is no need to go for building redevelopment. Keep reading, Your email address will not be published. Mr. Campagna then discussed the statute of limitations concept under ERISA. In the second suit, the plaintiffs alleged that the company was denying the health benefits promised to the retirees at the time of their retirement. The retirees now must use HMOs and make co-payments contrary to the promises made to them. This refers to a process of reconstruction of a residential premise by the demolition of the existing structure and construction of a new one. Often employees would like to retain their current investment in the sellers stock. With respect to the anti-cut back rule, Mr. Hickey described the problem created by existing law, which requires that the plan of the acquiring organization maintain all of the optional benefit forms offered under the acquired plan. Log in or create an EDUCAUSE profile to manage your subscriptions. Across the institution? "Examining the Effects of Deregulation on Retail Electricity Prices," Department of Applied Economics . And telemedicine has become far more mainstream than it was two years ago. That means that the plan may be restricted in its ability to divest itself of the shares. Key Takeaways Restructuring is when a company makes significant changes to its financial or operational structure, typically while under financial duress. Current cash-balance plan legislative proposals would also substantially inhibit continuity of benefits, for example: Ms. Hennessy indicated that the subject matter was important because laws intended to protect participants should not impede seamless continuation of benefits where both buyer and seller have an interest in maintaining the status quo. The case was filed in May 1999 in the Eastern District of Virginia in Richmond. The retirees were promised the same level of benefits in retirement as they received as active employees. 8 reasons it's time to adopt a new org structure PBGC Departments | Pension Benefit Guaranty Corporation The Department of Labor should look at the current claims regulation project in the context of what provisions are in place where there has been a change in the plan sponsor from the sponsor who administered the plan at the time the claim arose. The witnesses offered that if buyers are encouraged to identify and correct these defects without fear of penalties, they might be more likely to continue the sellers plan. This situation is even worse in cafeteria plans, flexible benefits, and self funded health plans where the rules provide no transition period. If you decide to move forward with job restructuring, complete the following steps: Notify the employee (s) Inform necessary departments about any changes (e.g., HR) Have the employee fill out or sign paperwork (e.g., contract or notification of changes) Adjust the employee's pay (if applicable) Make updates to payroll (if applicable . more information Accept. Benefits of Restructuring a Company - Links Financial Maintain DE&I Commitments. Yet the alternative, which is to discontinue the salary deferrals for a period, is clearly not the right policy answer. The program involves salary reduction elections where the employee agrees to give up cash wages in exchange for health coverage or some other tax-advantaged benefit. Assets must be set aside to fund retirement benefits, and held solely for that purpose. The concepts of settlor and fiduciary functions address the balance between the employers versus employees rights under a benefit plan. To encourage retention of savings for retirement, participants may transfer funds from one tax- sheltered retirement vehicle to another without current taxation. When to Reconfigure and When to Restructure, Tackling the Challenges of Restructuring and Reconfiguration. As to the "compliance" perspective, Mr. Rucci stated that he supports any efforts to protect funded and vested benefits. In a merger, two companies in similar industries combine to form a single entity, but in an acquisition, one company buys the assets of the other. There will be times when a business may need to review and revisit its corporate structure. That becomes a settlor function of the successor employer. This will provide open space for kids playing. Employers also make oral representations relative to their relationship with the employees. Federal government websites often end in .gov or .mil. The employer controls the business and the benefit plans (except in the case of multi employer, Taft-Hartley Act plans). There was significant discussion on this point also highlighting the timing and limited number of notices required to participants in the event of a reorganization of a sponsor of a defined contribution plan. There will be times when a business may need to review and revisit its corporate structure. 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. (Baxter-Travenol acquisition of American Hospital Supply Corporation in 1985), "protect the level of benefits strategy" - the more liberal benefits were retained (Casemark spinoff from Baxter International in 1992), "what will it take to be competitive" strategy - benefits for all employees were reduced to be competitive (Allegiance spin-off from Baxter in 1996), "challenge the legacy" strategy - benefits were changed (Sears transformation), freezing of the benefit in the predecessor companys defined benefit plan, no credit in the present pension plan for service with the predecessor employer. Portability inhibitors: The same desk rule is a major inhibition to portability for which the only meaningful solution is repeal of the rule. Below are few of the benefits 1. The following table summarizes the situations encountered relative to ERISA plans. Information Technology Governance Institution, Good Communication: The Other Social Network for Successful IT Organizations, Creative Commons Attribution-Noncommercial-No derivative works 4.0 license, Cybersecurity and Privacy Professionals Conference, Restructuring gives institutions a chance to. Participant rights to direct their investments. Steps in Managing a Reorganization | People & Culture There are times when the rate of change slows and times when it seems virtually manic. OCFO can be reached during normal business hours at 202-229-4170. Based on the testimony heard and the information that was submitted, the Working Group has made the following observations: We unanimously make the following specific recommendations: The Department should create in conjunction with the IRS and PBGC guides to employee plan issues related to restructuring. As such, it may overstate the activity in this country. Section 401 PLR 200024056, Same desk rule does not apply to distributions to terminated employees hired by new primary government contractor. This area needs to be addressed and will be looked at by the Service in later years. point of view, restructuring your business could significantly reduce your tax liability going forward. The DOL is looking at these penalties as part of the revised Form 5500 reporting system, but no specific statement was made relative to relief in this area. This working group has studied the existence of conflicting provision or the absence of guidance. After all, a lack of proactive support during such delicate and important change projects can easily make or break that project. 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. In the mid-1990s, New York Life converted those investments into its news proprietary mutual funds -- to grow the size of those funds, according to the suit. Faculty members connect both institutional and personal devices to a network, and reliability is essential. While retirement plan concerns were the most frequently raised by testimony from employers, health plans and cafeteria plans were also mentioned as presenting problems. An official website of the United States government. OGC consists of the four departments listed below. The general rules of fiduciary conduct apply. The text of this EDUCAUSE Review online article is licensed under the Creative Commons Attribution-Noncommercial-No derivative works 4.0 license. The general problem with the current regulatory scheme is that the statutory and regulatory rules applicable to mergers and acquisitions were developed piecemeal in response to particular issues or situations. This exceeded the participation level of every other executive position in the post-merger integration. 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". The "compliance" perspective. If the building is between 15 years to 30 years old, the structural audit should be done once in 5 years. Restructuring offers huge opportunities for the IT organization and the institution it serves. She indicated that grandfathering the sellers pension design for transferred employees can create discrimination testing problems over time. On the one hand, for instance, a roadmap ensures that everyone knows their roles and responsibilities during the project. preapprove specific cloud services for individual and institutional use; evaluate the costs/value of using cloud rather than traditionally provisioned services; create security guidelines for acquiring cloud services; create specific security requirements for cloud services that integrate with highly sensitive institutional data; and. Merger of defined contribution plans must protect the participants accrued benefit, as they existed prior to the merger. Over a six-month period 15 witnesses from the Departments of Treasury and Labor, Internal Revenue Service, practitioners advising plan sponsors, corporations and participant advocacy groups testified on issues related to the benefit continuity and other consequences arising from the restructuring of the plan sponsor. Essentially, it comes down to moving administrative work away from the resources that shouldnt be doing it in the first place. 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. Utilizing man-made consciousness, AI, and context-oriented direction, WalkMe adds a powerful UI layer to raise the computerized proficiency, everything being equal. Early retirement incentive programs as a human resources restructuring OMA can be reached during normal business hours at 202-229-4180. This would allow the different sectors in a business to be split with the creation of subsidiaries. Computing devices, whether personally owned or institutionally purchased, are replacing devices once deployed by the central IT organization. Requirement: Written PlanCitations: ERISA Section 402(a)(1), Treasury Regulation Section 1.401-1(a)(2) for a retirement plan; IRC Sections 125, 127, 129, 137 for assorted welfare benefit programs. The result is increased work opportunities for more junior staff and the more experienced professionals have more time available to focus on strategic work. While the press tends to focus on the negative aspects of restructuring, there are benefits to taking a fresh look at how and where work is being performed in an organization. Communications strategies include developing and maintaining e-mail lists, newsletters, websites, and a social media presence, as well as acquiring feedback from the user community. The advantages of company restructuring. Separating trade and property ownership will help protect the value of the property from uninsured liability arising from the trade side of the business. Understanding and assessing the current context of organizational change is a starting point for effectiveness. For example, one advantage of restructuring to a group structure compared to operating through separate companies is that groups of companies are provided with certain tax exemptions and reliefs regarding transactions between group members (subject to certain conditions being met). The absence of guidance creates unnecessary confusion and should be corrected. Corpus fund received by each individual member. Washington, DC 202101-866-4-USA-DOL, Employee Benefits Security Administration, Mental Health and Substance Use Disorder Benefits, Children's Health Insurance Program Reauthorization Act (CHIPRA), Special Financial Assistance - Multiemployer Plans, Delinquent Filer Voluntary Compliance Program (DFVCP), State All Payer Claims Databases Advisory Committee (SAPCDAC), Advisory Council Report of the Working Group on Benefit Continuity after Organizational Restructuring, Summary and Testimonies of Expert Witnesses. That study highlighted significant downsizing following business combinations. OIT provides IT and electronic communications services and support to PBGC; plans for, directs and coordinates the allocation of corporate resources for IT services, support and related activities; delivers IT business solutions driven by customer requirements; operates, maintains and safeguards PBGC business and infrastructure systems; and oversees the acquisition of IT resources for PBGC. 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. These would not typically apply if the companies were not in a group structure. (5) Buyers in successful combinations reported significant downsizing of their workforce 51 percent of the time. 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. The right itself is not protected. Requirement: Settlor FunctionsCitations: Various, see, e.g., Lockheed Corp. v. Spink, 517 U.S. 882 (1996). PDF U.S. Department of Labor Black out periods during the investment transfer. 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. Under the Departments guidance, the arrangement is considered temporary (and a filing will not be required) if it does not extend beyond the end of the plan year following the year in which the change in control occurs. Workforce reduction strategies - HR Operations The primary reasons for restructuring can include: Something is broken. He summarized his three perspectives by recounting a personal anecdote involving his family, who were employed by the steel industry. These are some examples of potential benefits that companies use to guide restructuring activities: Levels businesses with competitors: Through restructuring, companies have the opportunity to improve their finances, improve organizational structure or adapt to changes in an industry. As per the experts, the conservative figure is around 30 years if the building is maintained well. 5 Benefits to Organizational Restructuring | Red Clover HR A business impact analysis can be used to assess how the change will impact the organization and its operations. Restructuring gives institutions a chance to rethink their IT organization's services and units, where they reside, and how they might consolidate or distribute the organization's functions. 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. Today's IT organizations must be agile, engage the institutional community in decision making, align services to institutional priorities, communicate effectively, and respond to emerging and promising technologies. Regardless of the perspective, however, restructuring entails enormous angst. What are the benefits of restructuring? It could cut back on employees and equipment to streamline business operations. Increase employee engagement If employees within the department have low levels of engagement and productivity, reorganizing the department can be a good way to resolve these issues. Succession planning ensures that timing is correct, for a business to pass as seamlessly as possible, whilst consideration can be given to how ownership is transferred, including share rights and that this is done in the most tax-efficient method possible. Mr. Gottesdiener said the suit also contends that as part of New York Lifes scheme to use its in-house employee benefit plans to jump start the companys entry in the institutional mutual fund business, the company similarly abused its stewardship over its 401(k) plans. Reorganization, or business restructuring, is a process where a company does an overhaul of its current strategy, setup, and operations. It was Mr. Rucci's conclusion that the Allegiance employees benefitted the most in the long run, even though there were short-term give-ups in benefits. 10 Benefits of Organizational Restructuring - CMI The organizational restructuring of an employer commonly causes uncertainty and anxiety among employees, pensioners, and their families. If the plan retains the shares of the original sponsor following a restructuring, those shares may lose their status as qualifying employer securities relative to the plan. A double payment can arise where a transaction involves a change in plan years -- a premium was due on these participants at the beginning of the predecessors plan year and, again, for the successor plan. Testimony of Alan Tawshunsky, May 9, 2000, page 40. Restructuring can also be focused on bringing in new technologies to benefit a firm. Except for those employing very few employees, employees can to continue their employer- provided health coverage at group rates in the event of certain loss of coverage events, including termination of employment. Many of these studies have examined the effects of restructuring and mergers on cost, staff nurses, and patient outcomes. 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. Advantages and disadvantages of restructuring - Restructuring.net Also, the anti-cutback rule inhibits portability due to the administrative burden discussed above. Jim Norby, Northwestern Bell retiree. Piecemeal solutions sometimes create new problems and leave other questions unanswered. Court Says Participant May Sue Employer for Failing to Provide Insurers Claim Form? Bottom line, if you are considering a restructuring for your business, careful planning of the financial business case with a clear focus on benefits, can result in opportunities to take your company and your organization in a new direction. The company may dismiss employees, eliminate departments, or close some of its retail locations. On the question of participant deferrals through a cafeteria plan, Mr. Campagna and Mr. Canary noted that they were not aware of any enforcement actions in this regard but that this was not their specific field of influence. Either alternative could result in a loss to the participant, either in the form of an actual loss of principal in a higher yielding investment or in a lower return in the safe investment. This can also be an excellent method to help increase employee loyalty and also to help increase employee retention. This can create discrimination testing problems as the group of transferred employees shrinks over time and becomes more senior (and therefore more highly compensated). The working group recognizes that this is an extremely complicated area and does represent a compromise between flexibility and the general policy goal of nondiscrimination. This case was decided against the retirees on the basis of the Hughes case. Types of restructuring (with definition and what to expect) In response to the question has HIPAA caused some employers to abandon the preexisting limitations requirements because 90% of the employees get certificates of credible coverage, Mr. Tawshunsky stated that it was his understanding that a fair number of employers feel that preexisting condition exclusions are now more trouble than they are worth. This is found in Internal Revenue Code Section 410(b)(6)(C). But, this rule is commonly overlooked. A commercial roofing contractor was in hyper growth mode. There is no vesting concept in ERISA for welfare plans, but frequently the participants in these plans have received written and oral representations that the benefits would be available for life. Other times the change is focused on grouping certain activities together to get better operational efficiencies or superior service levels. Indeed, since the funds inception, they have consistently had, in the aggregate, half of all their assets come from the plans. Typically a buyer is unable to identify problems with a plan, particularly operational problems, until after the transaction when the buyer has been administering the plan for some period of time. Rather, the cafeteria plan rules must be examined from the perspective of the impact of any change upon the participant. Issues for defined benefit plans include a situation where the sellers plan was terminated before the acquisition, but the final distribution has not been made until after the acquisition and there is an unfunded benefit liability to the PBGC. As many research firms have noted, for instance, change management sponsorship can have a major influence on a projects outcomes. The data on employee distance from merger policy and process are sufficiently clear as to justify a cultural shift by top management as well as by senior HP people. Sections 79, 105(h), 125, 127, 129, 137, 501(c)(17) and 505, e.g., for various welfare plans (these include coverage nondiscrimination standards, as well), Requirement: Anti-cutback RulesCitations: IRC Sections 411(d)(6) and 414(l) and ERISA Sections 204(g), 208 and 4231(b)(2), 4232(b), Requirement: VestingCitations: IRC Sections 411 and 414(a), ERISA Section 203, Requirement: Aggregation/AffiliationCitations: IRC Sections 414(b), (c), (m), (n) and (o) with an exception in IRC Section 414(r); ERISA sections 210(c), (d), 4001(b)(1) Many companies report that the disconnect between words and actions in this area has come home to hurt them in retention and ability to fully integrate new teams.".