Our decision to include an employee benefits section in our guide to top employment lawyers made it very likely that a lawyer from Ivins, Phillips & Barker would be on the elite list of twenty. The Washington, D.C.-based firm, founded in 1935, focuses exclusively on employee benefits along with federal tax and estate and gift tax law matters. Within the firm’s excellent reputation, our research pointed us to Kevin O’Brien, who has practiced in the area of employee benefits since the early years of the Employee Retirement Income Security Act (ERISA, passed in 1974). O’Brien worked at the Labor Department while getting his degree at the Georgetown University Law Center.
Lawdragon: How did you first become interested in this type of practice?
Kevin O’Brien: I attended Georgetown Law School and, as an undergraduate history major, I was surprised to find that I especially liked my federal tax courses. In the Spring of 1975, my corporate tax professor mentioned that the Labor Department was looking for part-time help to deal with ERISA, and that this was mostly tax law.
I applied for the job and had the good fortune to be assigned to a tax lawyer who had recently been sent to the Labor Department from the Treasury Department to get the Department’s interpretative functions up and running. What was supposed to be an 8-hour-a-week job, morphed into a 30-hour-a-week job while I was still attending law school. I worked on all kinds of projects that were well above my pay grade. I worked on the initial joint and survivor annuity regulations and the first prohibited transaction class exemption. I also wrote a number of background memos on the “top hat” plan exemption and drafted the procedure for requesting advisory opinions.
LD: What are some aspects about this work that you find professionally satisfying? What has kept you at it over the years?
KO: Employee benefits law and practice has changed considerably from my early days of practice. At the start of my career, ERISA was brand new, there was a constant barrage of new regulations and nonstop legislative changes. At this time, the agencies and the agency staffs wielded all the power. If there was a question about a particular provision, the question was, “What did Harry think?” – meaning Harry Conaway at the Treasury Department. When a plan document was drafted, the key question was whether the IRS would approve the plan wording in a determination letter review, and there was less concern as to whether a court might interpret the law differently.
All of that began to change about twenty years ago. As the pace of legislation died down and the law matured and employee benefit issues became more politicized, more of the key issues were addressed by the courts. An example was cash balance plans. The Treasury and IRS became paralyzed in addressing the age discrimination aspects of cash balance plans and IRS review of these plans ground to a halt. Only after the first court decisions came down did Congress amend the statute in 2006 to address these issues. The issue of same-sex marriage is another example of where the courts addressed a key question before the agencies or Congress had done so.
The waning regulatory influence also was seen with the development of defined contribution fiduciary law. For reasons that are still inexplicable, the Labor Department dallied in their study of Section 401(k) expenses, and it was only after the class action law firms challenged the size of investment-related fees in the courts, that the DOL required reporting and disclosure of direct and indirect investment fees. The 2017 fiduciary regulation represents the Labor Department’s attempt to reengage as a key player in this area, but we have yet to see how that will play out in terms of Washington, D.C. politics.
LD: What are some other changes?
KO: The way companies operate has also changed employee benefit law practice. Plan sponsors have reduced headcounts and no longer administer plans in-house. The outsourcing of plan administration and investment work has created an entirely new area of practice – the negotiating and drafting of outsourcing agreements. The outsourcing of plan administration work also means that there are far fewer in-house and outside lawyers who are conversant in key aspects of qualified plan law, such as the IRS nondiscrimination rules.
The demise of defined benefit plans in favor of defined contribution plans has been another significant change, particularly with the move to participant directed investments. As noted, the legal developments surrounding defined contribution fees has placed enormous pressure on plan committees to structure appropriate plan investment choices. Defined contribution plan designs have also become more standardized as a result of statutory changes designed to ease certain aspects of nondiscrimination testing, which has encouraged the use of master and prototype plans instead of individually designed plans.
As for defined benefit plans, we are in the last throes of these plans, as plan sponsors look to de-risk and eventually terminate and annuitize these plans. The close out of defined benefit plans will have an important effect on some aspects of ERISA fiduciary practice, because it is the defined benefit plans that invest in venture capital funds, private equity funds, and other esoteric investments.
LD: How did you come to arrive at Ivins Phillips?
KO: I was told about Ivins, Phillips & Barker in 1975 when my mentor at the Labor Department mentioned the firm. When I interviewed with the firm I was struck that a firm so small in size had such a great client base, and that has continued to be the case through my forty-one years with the firm.
Ivins, Phillips & Barker is one of the nation’s premier tax and employee benefits specialty firms. We represent a significant number of Fortune 100 companies, as well as many midsized and smaller employers, on employee benefits matters. Our Washington, D.C., base places us in the heart of the tax and employee benefits world. We have longstanding relationships with Internal Revenue Service, Department of Labor, Department of Health and Human Services, and Capitol Hill staff, many of whom are former colleagues of Ivins attorneys.
LD: What else do you think makes the firm unique?
KO: The size and make-up of our firm allows us to staff matters in a lean and efficient manner. Our partner compensation is lock-step, so our incentive is the same as our clients’ – to allocate work to the attorney who is most capable of performing it well. We expose all of our attorneys to a wide range of benefits work, instead of pigeonholing lawyers into narrow sub-specialties. Our ability to “see the forest for the trees” enables us to spot issues that other firms miss and craft creative approaches to solving problems.
Representing employers is the core of our employee benefits practice. Many of our competitors represent insurance companies, third party administrators, financial services firms, and other entities that service large employer plans. Our client base consists almost entirely of employers, which enables us to vigorously represent our clients without raising actual or perceived conflicts of interest. In short, we can provide our clients better service with less red-tape for in-house counsel to manage.
LD: Can you describe a recent client matter that you’ve handled?
KO: I have been involved in a variety of significant projects in recent months. We have an employee-independent contractor issue involving the status of certain insurance agents that is docketed in the Tax Court. I have also been working on a large tax refund claim involving qualified and non-qualified stock options of a technology company that went public fifteen years ago and that is just now utilizing the stock option deductions from the pre-IPO period. The issues involve the proper valuation of the company’s stock in the weeks before their IPO and conducting a survey to establish the basis for tax deductions attributable to disqualifying dispositions of ISO [incentive stock option] stock.
I have also been working on a couple of matters of more widespread significance. I have an advisory opinion request before the Labor Department asking about the status of medical plan data under ERISA – the specific question is whether de-identified plan data is an ERISA plan asset. This is a highly important question in the development of data-based medical analytics.
LD: Interesting. Anything else?
KO: Another interesting project involves an idea to promote more aggressive funding of defined benefit plans. Many plan sponsors aggressively fund their pension plans to avoid the “trapped surplus” issue – at plan termination any plan surplus is subject to the Code Section 4980 reversion tax. The idea enables a plan sponsor to make large tax deductible contributions to their pension plans so as to reduce the level of PBGC [Pension Benefit Guaranty Corp.] variable rate premium obligations, and then later recover the plan contribution without a plan termination if the plan funding level improves whether due to asset value increases or liability reductions due to future interest rate increases. This funding approach would require both Labor Department and IRS approvals, and we have had extensive and constructive discussions with both agencies on the idea.
LD: What do you wish you had known or done differently in school? Or, put another way, do you have advice now for current law school students?
KO: I would give the advice given to me by my father. I had barely started law school and my father asked me if I had gotten my subscription to the Wall Street Journal yet. He said that I should study the first page of the paper to see how they summarize “What’s New” – it is brief and to the point. He said that businessmen don’t have time for long-winded memos. Many law students, particularly those with law review experience, are accustomed to a much different form of writing and replete with tons of footnotes and asides. Footnotes are fine for an academic piece, but they often just mask the writer’s indecision when wrestling with an issue. So my advice is: lose the footnotes and get to the point.
LD: Is there a matter or client in your career that stands out as a “favorite” or one that is particularly memorable?
KO: In the earlier part of my career, I spent a good deal of time on flexible compensation issues. One of my partners did the lobbying work on cafeteria plans and 401(k) that led to the enactment of these provisions in 1978. These provisions raised a host of interesting tax issues that involve the basic tenets of income tax law – the constructive receipt doctrine, the economic benefit doctrine, and the assignment of income doctrine. We organized the Employers Council on Flexible Compensation (ECFC) in 1981 to protect the interest of our clients who were the early adopters of these plans, and these plans are now firmly rooted in compensation packages nationwide.