By: Andrew L. Oringer
I have been asked to write about issues facing US lawyers in the area of ERISA (the Employee Retirement Income Security Act 1974) and executive compensation (for convenience, I’ll consider the executive compensation practice to be a part of the ERISA practice, in references below). I think the keyword here is ‘change’ – it’s clear to me that change is the hallmark of my area of expertise.
Sometimes, ERISA-related change springs from political or administrative change. Sometimes, there is just the natural flow of the legal process. And sometimes, it’s the courts. This is an area that gets reinvented with incredible consistency.
In the ’80s, Congress repeatedly reshaped many of the seminal rules governing tax-qualified pension and other retirement plans. These changes accompanied a seismic shift if the focus of American retirement policy from traditional employer-funded ‘defined benefit’ pension plans to individual account ‘defined contribution’ plans funded significantly by the employees themselves.
If in the ’70s you told a pension practitioner that the centerpiece of American retirement policy was about to become a non-guaranteed individual-account plan funded in significant part by employees that is managed by people who are not investment professionals and that generally pays out in a non-annuity single sum, you may well have been laughed out of the room. Yet, that’s precisely where we are.
More recently, a whole new practice area came into being with the Enron-fueled addition of section 409A of the Internal Revenue Code of 1986, which is broad in its scope and often maddening in its application. More generally, executive compensation generally witnessed a collision of considerations arising under the tax laws; Sarbanes-Oxley, ‘TARP’, Dodd-Frank, and other securities laws and regulations affecting both design and disclosure; and substantive recommendations from none other than the US Treasury. And then came healthcare reform, which became the newest 800-pound (or heavier) gorilla in the room.
And there have been very recent developments. In the last year or so alone we had the implementation of a rule – the US Department of Labor’s amended fiduciary rule – that was arguably as important as any since ERISA’s enactment, and then, in a development as astounding as the implementation of that rule, we had its complete elimination by the courts. The rule, while it was there, changed the way in which financial services organizations did their business, and reverberated even beyond retirement customers with an effect on financial practices generally. The rule’s sudden demise was jarring, and it remains to be seen where market practices will land. And the impact of the rise and fall of the rule continues to be seen in ongoing federal and state regulatory efforts.
On the executive compensation front, one of the three or four most important statutory tax provisions to an attorney working with public company executive compensation was amended in a way that essentially eliminated the provision as a practice focus. Attorneys were left scouring over transition rules, as the relevance of the provision to compensation structuring disappeared. On the health care front, as indicated above, several years ago the US healthcare system was entirely made over. The legislation survived two trips to the US Supreme Court. But now a lower court has held the entire statute to be completely invalid under the Constitution, pending further appeals. Where that one ultimately lands is anyone’s guess.
As a result of the ever-changing nature of the ERISA practice, it is often the case that the young ERISA lawyer can enter the practice, and not be significantly ‘behind the “The impact of the rise and fall of the [US Department of Labor’s amended fiduciary rule] continues to be seen in ongoing federal and state regulatory efforts” as to any number of important aspects of the practice. In fact, there can be almost an advantage to entry after another transformation, as the new lawyer learns the practice from the ground up and delves into nuances as they unfold, unburdened by sometimes confusing recollections of how things once were. But, on the flip side, the challenge to stay current is real and can be daunting.
Change has changed the nature of the practice. While the technical foundational aspects of the practice surely remain, the issues being encountered have arguably become somewhat less obtuse and more judgement based, finding their way into the general discourse on issues that are understandable and of interest to non-practitioners. As the issues have become more rich and diverse, they have tended to go from being often incomprehensible to being more accessible. The client relationships have moved towards more senior personnel as the value-added opportunities for the practitioner have grown and expanded.
Current events will likely continue to dramatically affect the practice. At the highest levels of government, will the Republicans hold the presidency in control in 2020? How will Congress be configured? What will that mean to initiatives that have been put off? What will it mean to rules that have been changed or repealed? With all of these ebbs and flows, the way in which ERISA practitioners have practiced has itself evolved. There was a time when the ERISA attorney covered the full range of retirement plans and welfare plans. The practice seemed broad and comprehensive, but manageable. Then, employment agreements were thrown into the mix, leading the practitioner towards the world of executive compensation. Now, we have the fiduciary practice and the comprehensive challenges presented by healthcare reform. One can reasonably wonder whether we are past the point where the oxymoronic concept of the ERISA generalist is still viable.
Regardless of what is possible and what may be aspirational, it is now clear that sub-specializing – whether it be, for example, as an executive-compensation practitioner, a fiduciary lawyer, or a healthcare specialist – is itself now a viable approach that can lead the practitioner to strong success. Clearly, we have reached the point where sub-specialization within ERISA is eminently possible, and there are now countless examples of leading and other highly successful practitioners who are executive compensation, fiduciary, healthcare, and other specialists.
For me, there’s a bit of a wistfulness here, as the interaction between the various practice sub-areas that may find their way under the ERISA banner can be significant, in both obvious and subtle ways, and the ability to see the way it all fits together can be a real advantage.
In the world of employee benefits, it seems like the one constant is that there is no constant. It is truly a challenge to stay current and fresh…but it can be extremely satisfying when you’ve done so (or convince yourself you have).
Andrew L. Oringer is a Legal 500 Hall of Famer and co-chair of Dechert’s ERISA and Executive Compensation group, and leads the firm’s national fiduciary practice in New York.
This article was first published in the March 2019 issue of The Legal 500’s magazine. Reprinted with permission. The article may also be accessed at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3351963.