Law Firm News

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Law Firm News

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Quarles & Brady

Quarles & Brady Streich Lang LLP Partner Elected As President of Arizona Business and Education Coalition
Charles W. Jirauch, a partner in Quarles & Brady Streich Lang LLP’s Intellectual Property Group, has been elected President of the Arizona Business and Education Coalition (ABEC) Board. He will serve a two-year term.

The Arizona Business and Education Coalition is a unique place where business and education leaders can discuss and collaborate towards improving the state of Arizona’s student preparation and workforce development,” said Mr. Jirauch. “I look forward to building on ABEC’s successes and bridging the gaps between Arizona’s education, business and government leaders.”

Mr. Jirauch practices in the area of Intellectual Property litigation and strategic planning, and in the area of complex litigation for technology companies. He has represented technology companies in litigation matters involving computer programs, automotive parts including electronics and air bags, medical instruments and products, pharmaceuticals, sporting equipment, semiconductor devices, circuits and manufacturing processes, and industrial and HVAC intelligent control systems. Mr. Jirauch is on the Board of Directors for the Arizona Technology Council and an Advisory Council to the Dean of Engineering at Arizona State University. Recently, he was listed in The Best Lawyers in America for Intellectual Property law.

08-11-2006

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Kirkpatrick & Lockhart Preston Gates Ellis LLP

Pension Protection Act of 2006 Contains Far-Reaching Reforms For Retirement Plans
Congress has passed the Pension Protection Act of 2006 (""Act""), a package of sweeping reforms for employer-sponsored retirement plans that the President is expected to sign. While many provisions of the Act do not take effect until 2008, some will become effective as early as January 1, 2007. Chiefly, the Act changes the funding rules governing defined benefit plans, clarifies the rules for cash balance plans, makes permanent certain EGTRRA provisions enacted in 2001, mandates rapid vesting schedules for all employer contributions to defined contribution plans, promotes diversification and investment education for plan participants, and endorses automatic enrollment for 401(k) plans. From any perspective, the Act will have a profound impact on retirement plan sponsors.

Defined Benefit Plan Funding Obligations and Other New Requirements
Effective beginning with 2008 plan years, the Act sets up a new scheme for measuring the minimum required contributions for single employer-defined benefit pension plans. Minimum funding is defined as the present value of benefits accrued during the current year, plus the amortized amount of any funding shortfall. There is a transition rule in the case of small funding shortfalls.

Enhanced funding obligations are imposed under a separate set of rules for ""at risk"" plans — those whose funding percentages in the preceding year are less than 80 percent using normal assumptions and below 70 percent using ""at risk"" assumptions. The Act increases required contributions for such plans by applying ""at risk"" assumptions — that participants who may elect to commence a benefit within the next 10 years will actually retire and will elect the form of benefit with the highest present value. The increased contributions are phased in over a five-year period.

Underfunded plans become subject to restrictions concerning plan amendments that increase benefits or accruals, or accelerate payment of benefits. The Act also changes the assumptions to be used for calculating lump sum distributions from defined benefit plans.

For multiemployer plans, the minimum funding standards include a reduced amortization period for liabilities resulting from plan amendments that increase benefits. In addition, new rules affect severely underfunded (generally less than 80 percent) multiemployer plans, by requiring them to adopt programs for improving funding over a 10- to 15-year period.

The Act also creates a new annual funding notice requirement for all defined benefit plans. The notice must be furnished to participants within 120 days after the end of each plan year and must provide information about the plan’s funded status, asset allocation and related issues. The DOL will develop a model notice within the next year.

Clarification of Cash Balance Plan Status
The Act clarifies the status of cash balance plans — a hybrid defined benefit pension plan design under which participants have hypothetical individual accounts, but actual investment returns are not individually allocated. Cash balance plans previously have been the target of lawsuits alleging age discrimination based upon (1) claims that the conversion reduced future benefit accruals of older workers, and (2) that the cash balance plan design is inherently discriminatory because the value of the accruals under the typical formula is less for older workers. In addition, the IRS moratorium on issuing determination letters for cash balance plans left such plans in a controversial and indeterminate state.

Effective for cash balance plan conversions on or after June 29, 2005, the Act: (1) provides that no inference of age discrimination arises for benefits of equal present value regardless of the participants’ ages, (2) requires the adoption of a three-year cliff vesting schedule, (3) imposes interest crediting limitations, and (4) restricts the use of ""wearaway"" in plan conversions (a rule under which participants with large pre-conversion benefits are suspended from accruing new benefits for a period after the conversion). The Act will likely mean that the IRS will begin to review unresolved determination letter requests in the near future.

Solidifying EGTRRA Changes and Establishing Shorter Vesting Schedules
The Act makes permanent numerous rules affecting retirement plan sponsors enacted under the 2001 legislation known as EGTRRA. Removing a 2010 sunset provision, the Act provides that catch-up contributions and the increased individual and annual contribution limits will not expire. The Act extends the portability rules permitting rollovers of retirement savings among various tax-qualified plans and other tax-favored retirement vehicles.

The Act changes the vesting rules for nonelective employer contributions to defined contribution plans. EGTRAA established reduced three-year cliff or six-year graduated vesting schedules for matching contributions. The Act now extends these shorter vesting schedules to all employer nonelective contributions such as profit sharing contributions, effective for plan years beginning in 2007.

Investment Diversification and Education
New diversification and participant education rules become effective December 31, 2006. The Act requires defined contribution plans holding publicly traded employer securities to permit participants to diversify their elective deferrals at any time. Upon completion of three years of service, participants (except those in certain ESOPs) must also be allowed to diversify the investment of employer contributions that are invested in publicly traded employer securities.

Further, the Act creates an exemption from ERISA’s prohibited transaction rules to allow plan fiduciaries who are investment advisors such as an investment manager, bank, insurance company, or securities broker to be compensated for giving investment advice to participants. A plan fiduciary may provide such advice if: (1) its fee does not vary depending on the participant’s investment selections, or (2) its advice is based on a computer model certified by an independent third party.

Automatic Enrollment
Prior to the Act, IRS rules permitted 401(k) plan sponsors to use negative elections — automatically enrolling employees and reducing their pay in the form of elective deferrals. Concerns that state payroll deduction laws might restrict or prohibit such automatic enrollment arrangements are removed by the Act. Effective for plan years commencing after December 31, 2007, the Act protects automatic enrollment plans against contrary state laws and provides an optional nondiscrimination safe harbor for such plans. In addition, the Act requires automatic enrollment disclosures be issued to participants explaining their right to opt out or alter the rate of contribution, and containing an explanation of how funds will be invested in the absence of investment direction.

The Act contains myriad other provisions affecting specific industries and interests, which are beyond the scope of this update. Please contact us to discuss the implications of the Act for your retirement plans.

08-11-2006

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McGuireWoods LLP

Joe McMenamin Discusses Products Liability Issues in Health Care
Joe McMenamin (Richmond) spoke on "Products Liability Issues in Health Care," at the Executive Fellowship in Health Law, offered by the Williamson Institute at Virginia Commonwealth University, Department of Health Administration, and the University of Richmond Law School, in Richmond on July 20.

08-11-2006

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Crowell & Moring LLP

“Q&A with Former EPA General Counsel Ann Klee”
Environment & Natural Resources Group partner Ann Klee, former general counsel at the Environmental Protection Agency, answers questions on her decision to leave the EPA and join Crowell & Moring.

08-11-2006

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Orrick, Herrington & Sutcliffe LLP

Orrick's Compensation and Benefits Team Examines the Proposed Pension Protection Act
The Pension Protection Act of 2006, passed by the Senate in early August and sent to President Bush for signing, has the potential to significantly change the United States pension and IRA investments.

According to the Associated Press, the 401(k) plan is getting the biggest overhaul in its 25 year history, and this bill could increase the number of employees who participate in company-sponsored savings plans. In addition to affecting companies and their employees, these changes will affect private equity funds, hedge funds, structured finance and the financial services industry.

The Orrick Compensation and Benefits team composed a pension investment client alert to highlight the impact this legislation could have, and includes 'to do' suggestions regarding what would need to be reviewed and modified based on the new exemptions and requirements of the Pension Act.

Among proposed variations to the current 401(k) system are allowing for automatic enrollment of employees in company-sponsored plans, endorsing an automatic increase in contributions, expanding the number of investment options, and making investment advice more readily available. It is anticipated that this bill will be approved by the end of August 2006.

About Orrick
Orrick, Herrington & Sutcliffe LLP is an international law firm with more than 850 lawyers in North America, Europe, and Asia. The firm focuses on litigation, complex and novel finance, and innovative corporate transactions. Orrick clients include Fortune 100 companies, major industrial and financial corporations, commercial and investment banks, high-growth companies, governmental entities, start-ups, and individuals. The firm's 16 offices are located in Hong Kong, Taipei, Tokyo, London, Milan, Moscow, Paris, Rome, Los Angeles, New York, Orange County, Pacific Northwest, Sacramento, San Francisco, Silicon Valley and Washington, D.C.

08-11-2006

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Mayer Brown LLP

Mayer, Brown, Rowe & Maw advises Bear Stearns on lease of new European HQ at Canary Wharf
Mayer, Brown, Rowe & Maw LLP's London real estate group has advised worldwide investment banking and securities trading and brokerage firm Bear, Stearns International Limited (""Bear Stearns""), on the pre-letting of 5 Churchill Place at Canary Wharf, London for its new European headquarters and the leasing of additional space in One Canada Square. Bear Stearns will take 206,000 sq ft of 5 Churchill Place which is due for completion in summer 2009.

Jeremy Clay commented: ""We are delighted to have advised Bear Stearns on the acquisition of their new European headquarters. We already act for Bear Stearns on the real estate side in the US but this is our first transaction for them in the UK"".

London real estate partners Jeremy Clay and Anita Jones led the Mayer, Brown, Rowe & Maw team advising Bear Stearns, supported by tax partner Peter Steiner, and construction partner John Rushton.

CB Richard Ellis also advised Bear Stearns.

08-11-2006

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Cravath, Swaine & Moore, LLP

CRAVATH REPRESENTS IBM IN ITS ACQUISITION OF FILENET
Cravath represented IBM in its acquisition of FileNet Corporation, a leading provider of business process and content management solutions, for approximately $1.6 billion. The lawyers involved in this matter are partners Scott A. Barshay and George F. Schoen, associate Michael E. Healy and summer associate Micaela R.H. McMurrough on corporate matters; partner Andrew W. Needham and associate Joseph L. Leti on tax matters; partner Eric W. Hilfers and associate Lori Diamond Goodman on executive compensation & benefits matters; and associate Matthew G. Morreale on environmental matters. The deal was announced on August 10, 2006.

08-11-2006

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