Retirement Plans/ERISA/Tax

Dechert’s ERISA lawyers are ranked among the leading employee-benefits practitioners by Chambers USA and other major ratings organizations. They work extensively with financial-services organizations, plan sponsors and plan fiduciaries on a wide range of compliance and design matters, including those relating to the management of plan assets, financial transactions with plans and other ERISA fiduciary matters. Our expertise extends to matters involving tax-qualified retirement plans, including master and prototype plans and 401(k) plans; IRAs, including related custodial agreements; “Section 403(b)” annuity and custodial programs; and welfare plans, such as health, life insurance and disability plans.

Among the types of programs, vehicles and financial instruments on which we have advised are:

  • Registered investment companies, both open- and closed-end
  • Unregistered funds (including investment partnerships, trusts and off-shore funds), group trusts and bank common and collective trust funds
  • Hedge funds, private equity and venture capital funds (including venture capital and real estate operating companies) and funds of funds 
  • Insurance company general accounts and separate accounts, and other insurance products (including investment-management arrangements)
  • Asset-allocation programs
  • “Wrap” programs
  • Conversions of group or collective trust funds to mutual funds, and other fund restructurings and reorganizations
  • Swaps and other derivatives, securities lending and futures
  • Shareholder-servicing programs
  • Revenue-sharing programs
  • Retirement planning services, including issues relating to required disclosure, proxy voting and tax withholding

We structure funds intended to avoid ERISA regulation and “plan asset” funds designed to comply with ERISA. We represent the sponsors of, and investors in, alternative investment funds structured financial products of a wide variety, such as those involving investment in distressed debt, collateralized debt obligations funds and mortgage-backed and asset-backed securities. Our experience extends to a wide variety of ERISA-related compliance issues for diversified global financial institutions, including advice regarding proprietary trading with employee benefit plans involving swaps and other derivatives. We have obtained formal regulatory guidance, including rulings and prohibited transactions exemptions on numerous transactions and issues, and we have assisted our own clients in regulatory audits and investigations.

Our ERISA attorneys are frequent authors and speakers, having often coordinated presentations with senior policy-making officials at the Internal Revenue Service and the Department of Labor, and have been asked to testify before Congress on proposed legislative initiatives. They have leadership positions in the American Bar Association and the New York State Bar Association, are on the advisory boards of a number of market-leading pension and benefits publications, and teach ERISA courses at national law schools.

Tax

Dechert’s highly skilled team offers extensive counseling capabilities with respect to the complex tax and employee benefits issues confronted by U.S. and foreign investment companies, investment managers, and distributors. Our lawyers have significant experience in dealing in tax issues for investment companies, advisers, and distributors of investment companies and financial instruments acquired by investment companies.

Our tax experience helps to ensure that we provide innovative solutions to the marketplace’s changing requirements and demands, including: obtaining rulings allowing investments in commodity linked notes and wholly owned fund subsidiaries investing in commodities; structuring fees paid by funds and their advisers to avoid preferential dividend concerns; assisting closed-end funds in avoiding adverse tax consequences to shareholders by obtaining a rulings on an in-kind redemption; structuring guaranteed financial products; qualifying a venture capital fund as a RIC; obtaining rulings allowing for the issuance of bonus shares and other inducements; and solving tax issues inherent in fund of funds, master-feeder funds, and Exchange Traded Funds products.

We have dealt with a variety of tax issues including:

  • Qualifying income
  • Diversification requirements
  • Preferential dividends
  • Multiple class funds
  • Master-feeder funds
  • Offshore funds
  • Hedge funds
  • Venture capital funds
  • Insurance dedicated funds
  • Funds of funds
  • Exchange traded funds (ETFs)
  • Commodity funds
  • Foreign currency funds
  • Business development companies
  • Mergers and reorganizations of funds and/or advisers
  • Liquidations
  • Prime rate funds
  • Interval funds
  • Auction rate preferred municipal bond funds
  • Single country funds
  • PFICs and CFCs
  • Share tender offers
  • Dividend reinvestment plans
  • Equalization
  • In-kind redemptions
  • Variable annuities and variable life insurance products

We have also provided guidance on:

  • Treatment of mortgage-backed securities
  • Synthetic variable instruments
  • Structured notes
  • Futures and forward contracts
  • Options
  • Straddles
  • Foreign currency transactions
  • Short sales
  • Constructive sales
  • Notional principal contracts
  • Contingent debt
  • Original issue discount
  • Securities loans

We have assisted in structuring and analyzing issues for variable annuities and variable insurance products as well as funds offered in conjunction with college savings plans. We have also advised on SEC requirements for after-tax return disclosure, including techniques to improve the tax efficiency of funds.

International Practice

In the international arena, we advised on U.S. funds’ foreign investments to minimize CFC (controlled foreign corporation) and PFIC (passive foreign investment company) issues, including suggesting to Treasury a mark-to-market regime for funds’ investments in PFICs; advising on use of functional currency by country funds; and designing offshore fund structures to avoid U.S. taxation.

Our team of tax lawyers in London has extensive experience in establishing new funds, both for existing fund management groups and in start-up situations. Relevant tax considerations have included issues arising out of selecting a closed-end or open-ended vehicle and, in particular, whether a fund should seek distributing status for UK tax purposes. Many funds managed in London have been established to attract worldwide investment through use of master-feeder structures, enabling shareholders to choose between tax deferral and tax transparency. Such structures also involve tax efficiency considerations for fund managers and, in particular, focus on whether advantages can be secured for managers with non-UK domiciled tax status and on the impact of capital gains taper relief. Our London team has also advised on the establishment of a number of employee benefit trusts aimed at securing significant tax deferral advantages for fund management operations while offering incentives for fund managers and employees.

Investment Advisers, Distributors and Fund Affiliates

Dechert’s tax practice also assists both U.S. and non-U.S. based investment advisers, distributors and fund affiliates with tax matters, including:

  • Counseling non-U.S. advisers of funds sold in the U.S.
  • Counseling U.S. advisers on minimizing their U.S. tax burden
  • Devising solutions to permit U.S. investment advisers for non-U.S. funds to obtain deferral of compensation or to share in the funds’ capital gains
  • Representing advisers (or affiliates) in contests with federal and state tax authorities
  • Structuring the compensation of advisers’ key personnel
  • Arranging corporate structures to minimize state taxation of domestic and foreign advisers