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  • Fiduciary Duties
  • July19th

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    The Supreme Court has agreed to review the decision in Amara v. CIGNA Corp, in which the Second Circuit affirmed the district court’s opinion that CIGNA’s cash balance plan conversion violated ERISA § 204(h)’s requirement that plan participants receive advance notice of plan amendments that provide for a significant reduction in the rate of plan participants’ future benefit accrual.

  • August18th

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    In July, the President sent draft legislation to Congress that would seek to ensure the independency of compensation committees. The Administration opined that some compensation committees may not be fully independent of management — for example, because the directors themselves stand to gain from the decisions of executives. And even where the members of the committee are independent of management, they may lack the tools to bargain effectively with executives over complex compensation decisions or may receive advice from consultants or legal counsel that face conflicts of interest.

    The proposed legislation takes three important steps to ensure that compensation committees have the independence and expert assistance they need to serve their important role:

    • First, the legislation requires that members of the compensation committee meet exacting new standards for independence. To be considered independent, members of the compensation committee may not accept any fees from the company for any activity other than their involvement in the board of directors, compensation committee, or other board committee.

    • Second, to ensure that committees are receiving objective advice, the legislation requires that any compensation consultants and legal counsel they hire be independent from management.

    • Finally, the legislation requires that compensation committees be given the authority and funding to hire independent compensation consultants, outside counsel, and other advisers who can help ensure that the committee bargains for pay packages in the best interests of shareholders. At the same time, it requires that if the committee decides not to use its own compensation consultant, it explain that decision to shareholders.