Editor: What attracted you to King & Spalding?
Raskin: King & Spalding is a great law firm with top-notch lawyers who collaborate well. The firm continues to expand its international presence, having opened an office in Geneva, Switzerland, this past June. (It is important to note that King & Spalding opens offices only when there is client demand for our "on-the-ground" services in a particular locale, not just for expansion's sake.)
In Atlanta, King & Spalding has a very strong practice in employee benefits and executive compensation, and from my perspective there was no question that this was a great firm at which to work.
What I am hoping to do is to expand our employee benefits and executive compensation practice generally, as well as create and grow one in our New York office. My goal is to grow this practice both nationally and ultimately internationally, as I did for my prior firm.
Editor: Ken, please tell our readers about your practice.
Raskin: I have been practicing in the employee benefits and executive compensation area for over 25 years. Most practitioners in this area at the big New York City law firms tend to have highly focused practices, but my practice is a bit different. Mine is a very broad practice covering virtually every aspect of that practice area.
Just to mention a few, I have handled employee benefits and executive compensation issues associated with M&A and other transactions, including bank financing and structured finance.
I have addressed fiduciary issues regarding prohibited transactions and those growing out of the investment of plan assets in investment funds. I have also been involved in compliance issues relating to both tax-qualified and non-qualified retirement and welfare plans. In the executive compensation area, I have worked on equity-based compensation plans, such as those involving stock options and restricted stock, and on all forms of deferred compensation. It is a diverse practice, and I like it that way.
Although I am not a litigator, I have been involved in ERISA litigation issues from the consulting side, working with litigators in the firm's very busy and exciting ERISA litigation practice.
I might mention that I enjoy writing articles and working with people in the process. In fact, for the first time in a long time, we will soon be publishing a monthly newsletter for our clients that alert them to relevant developments relating to employee benefits and executive compensation.
Editor: What are the hot issues in your group's practice area?
Raskin: From an executive compensation standpoint, the single most important issue is "pay for performance." There is a focus on what exactly that phrase means, as well as what currently is and will be required by the government for compliance. This issue is not going to go away. Pay for performance is related to the issues of disclosure to shareholders and employees about executive compensation and "say on pay."
With respect to benefits, there is a plethora of areas that are hot right now. With new legislation, and regulations being tightened, compliance issues have multiplied.
We will see new laws and regulations affecting disclosures of fees with respect to 401(k) plans. There have been overlapping attempts to push fee disclosure forward. The version of the American Jobs and Closing Tax Loopholes Act passed by the House included 401(k) fee disclosure requirements, but the Senate version does not, and it is unclear whether the fee disclosure provisions will be included in the final bill. Separately, the Department of Labor was expected to release final regulations governing service provider fee disclosure by the end of May, but has delayed in releasing them until Congress makes a final determination on whether to address fee disclosure in the Jobs Act. There are significant issues involved in transferring 401(k) plan assets to Roth IRAs due to a change in law effective this year that allows individuals to make such conversions without regard to their income level or federal tax return filing status. In addition, a big issue for defined benefit pension plans is whether there will be any temporary funding relief. Funding relief provisions were just tacked on to the Affordable Health Care for America Act, which would provide alternate funding methods for certain plan sponsors. Another area receiving attention is whether companies will allow for the treatment of domestic partners as spouses under their benefit plans, as President Obama recently directed that certain benefits be extended to same-sex domestic partners of federal employees, including employee assistance programs, AD&D insurance and long-term care insurance.
Obviously, the hottest issues of all are raised by the new healthcare law, the Patient Protection and Affordable Care Act (PPACA). There will be many issues that employers will have to address as a result of the new healthcare legislation. Two aspects of PPACA that employers and plan sponsors will need to consider now include (1) the new mandated expansion of coverage under group health plans to most adult dependent children up to age 26, and (2) whether their plans will be considered "grandfathered" for purposes of the reforms, thereby limiting the applicability of some of the new laws. The Departments of the Treasury, Labor and Health and Human Services recently issued joint guidance on both of these subjects. The regulations on covering dependents to age 26 provide additional information on pricing and terms of coverage for these newly eligible dependents. The interim final rules clarify what plans and coverage are considered "grandfathered," and what actions could cause a plan or coverage to lose its "grandfathered" status.
Editor: King & Spalding has a very extensive healthcare group. Will you be working with them given the changes provided for in the new healthcare legislation?
Raskin: Yes. I was in Atlanta recently and sat down with two of my partners in our healthcare practice specifically to discuss this. We will be working closely together. In fact, King &Spalding has a multi-practice group - the Healthcare Reform Task Force - which is focused on helping healthcare issuers, employers and plan sponsors understand and satisfy the new healthcare reform requirements.
My practice group deals with the many things that employers have to do as a result of the new legislation, which includes helping them update their plan documents. We will also be helping them comply with the automatic enrollment requirements. They will have to draft summaries of coverage and probably amend their appeals process for denied claims.
There will also be issues with respect to employee communications. Employees will have to be notified about the insurance exchanges and their eligibility for subsidized exchange coverage to make up for potential loss of employer contributions if they choose the exchange. Employers also have to be aware of potential penalties if they have more than 50 full-time employees and are not providing the government-required minimum level of coverage.
Many companies are now trying to figure out whether, from a financial standpoint, they are better off paying the penalty, providing the coverage, or trying to maintain "grandfathered" status for their existing plans. Undoubtedly some companies will decide not to provide health insurance because they feel that it will be less costly just to pay the penalty. Other companies may decide to provide coverage because they believe that it is the right thing to do. It will be interesting to find out how many companies are in each group. Employers with more than 50 full-time employees will have to file reports with the government detailing their compliance with the rules. There will also be payroll reporting requirements. Additional reporting requirements are imposed on companies with over 200 employees.
As I mentioned earlier, employers have to extend dependent coverage for adult children up to age 26. So, employers will have to change their plans to reflect that. These are just a few of the things that employers are going to have to deal with as a result of the new legislation.
Editor: At the time of this interview, the financial reform legislation is still being considered in conference. What are some of the issues of interest to your practice group?
Raskin: One issue is whether or not companies and their compensation committees will be required to appoint independent compensation consultants. Both the Dodd and Frank Bills require that if an independent compensation consultant is retained by the compensation committee, that the consultant be "independent." The Treasury Department's legislative proposals would require this too. However, there is no requirement that the advice of the consultant be followed or that disclosure be made as to whether that advice was followed. I think that is the right answer. The compensation committee and the company's management know the company better than anybody else, so it should be left for them to decide what is right after getting the views of a third-party expert. I don't think it makes sense for them to be required to follow the advice of the consultant.
Editor: Since the say-on-pay proposals that are currently being thrashed out constitute only a non-binding advisory vote by shareholders, how important are those proposals?
Raskin: Although the say-on-pay proposals are non-binding, directors understand that they express the shareholders' point of view. They know that they risk losing their board seat at the next election if they ignore shareholders' wishes.
Editor: You mentioned that it is best to leave compensation decisions to a company's board and management. What about Ken Feinberg's role in determining compensation?
Raskin: In setting compensation, he undoubtedly has to walk a very fine line between what the media or the public thinks is best and what companies feel they need to pay to retain the best people. If a company doesn't pay executives what executives believe they are worth in the marketplace, they may look elsewhere at U.S. or non-U.S. companies for employment. Is Ken Feinberg the best person to decide what reasonable compensation is? Has he immersed himself in the company's operations sufficiently to understand what makes sense? I can't answer those questions. But he has assumed that responsibility and is taking it seriously. He has done what he thinks is right.
Editor: Legal departments are placing great emphasis on controlling the cost of outside counsel. How does the firm plan to meet this challenge?
Raskin: First and foremost, in order to grow in this area, you must provide high-quality work at a cost that makes sense to your clients and potential clients. I say "cost" rather than rates because, in our experience, our clients' primary concern is the overall cost of a project vs. the value they receive, not necessarily what our hourly rates are. Indeed, rates are just one component of the overall cost of a matter, with other factors playing important roles, including the level of the people doing the work, the time it takes to accomplish each task, etc. As a firm, we are focusing carefully on managing our matters more efficiently to control costs. This means ensuring that we understand exactly what our clients are trying to achieve, working closely with our clients to prevent false starts and re-work, avoiding unnecessary activity, looking closely at how long it takes us to complete a matter and providing clients with alternative staffing options. We are also very open to alternative billing arrangements. Of course, one of the main benefits of certain types of alternative billing arrangements is that they can provide clients with more certainty about costs.
Editor: As you look down the road, which area within your practice group do you think will most rapidly grow in importance?
Raskin: I think that healthcare is one such area as people begin to understand the legislation and as more of it becomes effective (most of it is not effective yet). Employers will understand that they need to address what they are required to do, and we stand ready now to help.
All employers must comply with the law with respect to their employees. It is in many respects very complicated, and companies will need counsel in understanding and dealing with it. The employer issues are similar across the entire range of companies and industries.