Just Say No: Why Directors Should Avoid Duties That Will Subject Them to ERISA

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Pension plans are still a big part of the business of U.S. corporations. According to the Federal Reserve Board, as of June 31, 2014, U.S. companies had more than $3.1 trillion in pension liabilities on their books and had set aside approximately $3 trillion in assets to fund these obligations. Add to that the more than $5.2 trillion in assets in traditional 401(k) and other defined contribution plans, a portion of which is invested in company stock funds, and companies end up with a pretty sizable pool of money to invest and a significant corporate liability to be controlled and monitored.

Success in managing a company’s retirement plans impacts the retirement security of the company’s workforce and the annual pension expense recognized by the company for financial accounting purposes. Poor management of these plans can pose significant risks to a company’s business, and underfunded plans can materially impact a company’s financial performance. For these and other reasons, boards of directors of U.S. corporations with large pension plans typically retain some oversight responsibilities for these plans and the investment of their assets. This responsibility can fall upon the compensation committee or other standing committee of the board. And while it is almost self evident that effective board oversight is a good idea, in the context of retirement plans, such oversight should be exercised in a way that does not cause board members to be subject to the Employee Retirement Income Security Act (ERISA’s) fiduciary standards. ERISA imposes standards of conduct on fiduciaries that are more restrictive than those imposed on directors generally, and complying with these standards can lead to potential conflicts with a director’s overall responsibility to the corporation and its shareholders.

Educational Objectives:
• Explain why companies should avoid duties that will subject them to the Employee Retirement Income Security Act
• Discuss funding obligations associated with pension liabilities
• Describe corporate liability to be controlled and monitored
• Explore successful techniques in managing a company’s retirement plans

Who would benefit most from attending this program?
Companies, directors, pension and benefit practitioners interested in from obtaining knowledge about the relevant requirements of the Employee Retirement Income Security Act.



John J. Cannon III is a partner at Shearman & Sterling LLP. John is Practice Group Leader of the Executive Compensation & Employee Benefits Group and Chair of the firm’s Corporate Governance Advisory Group. In his practice, he focuses on all aspects of compensation and benefits, including corporate, securities, bankruptcy, employment and tax laws and Employee Retirement Income Security Act. He has extensive experience in executive compensation and corporate governance matters, Dodd-Frank and Sarbanes-Oxley, and the employee issues raised in the mergers and acquisitions context. John joined the firm in 1985 and became a partner in 1994. He is a member of the New York bar.


Kenneth J. Laverriere is a partner in Shearman & Sterling LLP’s Executive Compensation & Employee Benefits Group. He advises fiduciaries on the investment of the assets of pension plans and the design and administration of tax-qualified and nonqualified plans and the application of Employee Retirement Income Security Act (ERISA’s) plan asset rules to plan investments. His practice includes the structuring and analysis of a broad range of compensation arrangements, including equity and non-equity based incentive programs, deferred compensation plans, investment partnerships, carried interest plans, and financial adviser compensation programs. Kenneth works with financial organizations, asset management firms and investment funds on all aspects of ERISA compliance. He advises clients on compensation and benefit issues in merger and acquisition transactions in various industries and market sectors. Kenneth represents individuals and corporations in the negotiation of employment, termination and change in control arrangements. He also works closely with the litigation group on ERISA litigation matters and the bankruptcy and reorganization group in insolvency proceedings. He is a member of the New York bar.