Carried interest arrangements have been common for years in many types of private investment funds (“Funds”), including private equity, real estate, and hedge funds. Going back a few decades, the tax analysis applicable to carried interests was highly uncertain. More recently, the law has been clarified in material respects, but it has also become subject to scrutiny and numerous proposals over the years to close legislatively what is frequently characterized as a “loophole.” Those proposals culminated in a legislative change that was part of the 2017 tax reform legislation, but that change was relatively modest: it essentially increased the holding period for certain assets to qualify for long-term capital gains treatment to three years.

This article is intended to provide background to those interested in the design of carried interest arrangements and to serve as a useful practical checklist of relevant U.S federal income tax considerations.

Introduction

In a typical carried interest arrangement, a fund manager receives an interest in an entity taxed as a partnership (“carry vehicle”) that entitles the fund manager to share in a portion of the profits realized by a Fund. The “carry” nomenclature derives from the excess of the share of the amount of the profits paid to the holder relative to the actual dollar amount that is contributed to that holder’s capital account. The flow-through nature of the partnership for tax purposes means that the fund manager, and its principals and employees, can be taxed at long-term capital gains rates on the incentives earned as compensation for the fund manager’s services.

This article will primarily deal with “true,” rather than “phantom,” carried interest arrangements. A Phantom Carried Interest Arrangement (as defined below) attempts to replicate the economics of a carried interest arrangement through an unfunded, unsecured promise to pay that is taxable as deferred compensation. While Phantom Carry Interest Arrangements are common and useful in certain contexts, the tax consequences are materially different. A “phantom” or “notional” carried interest arrangement granted as a contractual obligation of the fund manager or an affiliate (“Phantom Carried Interest Arrangement”) generally results in ordinary income for the fund manager and deductible expenses for the sponsor. While such arrangements avoid the controversy and analytical complexity and uncertainty associated with carried interest arrangements, they do require compliance with Section 409A of the Internal Revenue Code of 1986 (“Code”), which involves its own unique set of complexities, uncertainties, and risks (and could raise additional issues under Section 457A of the Code). Section 409A is not applicable to “true” carried interest arrangements.

When designing and implementing a carried interest arrangement, the sponsor may not wish the participants to be considered partners for general or tax purposes. For example, on the business side, the sponsor may not want the participant to have any number of rights that a partner might have (although, in a variety of situations, concerns of this type can sometimes be addressed by contract). These types of business considerations will not generally arise in the context of carried interest arrangements for true owners and other similarly situated senior personnel because such individuals will already be owners (or are readily acceptable to existing owners as owners, (e.g., partners)). On the tax side, there may be concerns with:

• the dislocation that can arise for a participant when the participant receives a Form K-1 but was expecting a Form W-2;
• the loss of certain tax benefits that only apply for employees; and
• the distortions that can arise under the Self-Employed Contributions Act (“SECA”), as compared with the Federal Insurance Contributions Act (“FICA”) – in that, under SECA, the service provider will effectively pay both the provider’s and the recipient’s share of the taxes (in contrast to the result under FICA, where the employer pays the employer’s piece).

These types of tax considerations will often be somewhat manageable for owners and other senior personnel to the extent that the individuals are already familiar with and amenable to partner-type (as opposed to employment-related) tax rules.

Profits Interest in a Tax Partnership

Carried interest arrangements offer the opportunity for fund managers to participate in a Fund’s economic profits in a manner that generally retains the tax characterization of each item of gain, loss, income, or deduction of the Fund.

Analytical Considerations

Statutory Scheme

Subchapter K of the Code governs the treatment of entities taxed as partnerships. Subchapter K includes Section 721 of the Code, which governs the purchase of partnership interests for cash, property, or services. Upon purchase of a partnership interest, the acquirer generally has a basis in his or her partnership interest, which is then treated as a capital asset. Section 83 provides that property transferred in connection with the performance of services is included in the gross income of the employee in an amount equal to the fair market value of the property over the amount paid, generally at the first time at which the property is not subject to a substantial risk of forfeiture.

Judicial Background

The seminal cases of Diamond v. Commissioner and Campbell v. Commissioner address the intersection of the partnership and tax provisions of the Code, coming to different conclusions based on distinguishable facts.

In Diamond, the U.S. Court of Appeals for the Seventh Circuit held that a profits interest had a determinable market value at the time it was awarded, as evidenced by a sale of that interest barely three weeks later; and, therefore, that the taxpayer should have recognized income at the time of his receipt of the interest. By contrast, the Tax Court in Campbell concluded that the fair market value of the interests should have been taxable upon receipt under the principles of Section 83. On appeal, in Campbell, the U.S. Court of Appeals for the Eighth Circuit distinguished Diamond, and agreed with the taxpayer’s argument that the interests had only uncertain value. Thus, the Eighth Circuit reversed the Tax Court’s decision that the profits interest should have been taxable at grant.

Proposed Regulations

In 2005, in Notice 2005-43, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released proposed rules intended to provide greater clarity on the inconsistencies and conflicts between Subchapter K and Section 83 of the Code as they relate to partnership-related compensatory arrangements. Those rules were never finalized.

In 2015, the IRS issued new proposed regulations under Section 707(a)(2) (“Proposed Section 707(a)(2) Regulations”).While these were primarily intended to address certain management fee-deferral arrangements, they nevertheless have implications for certain design features of carried interest arrangements, including capped allocations of partnership income; allocations for one or more years under which the service provider’s share of income is reasonably certain; allocations of gross (as contrasted with net) income; and allocations that are otherwise predominantly fixed in amount, reasonably determinable under the facts and circumstances, or designed to assure that sufficient net profits are highly likely to be available to make the allocation to the service provider. Even though they were relatively well received by some commentators, they have not been finalized.

Revenue Procedure 93-27 and Revenue Procedure 2001-43

Revenue Procedure 93-27 provides that the IRS “will not treat the receipt of such an interest as a taxable event for the partner or the partnership” if:

• there are no liquidation rights or other features that would indicate that the recipient has received an interest in capital of the Fund or the sponsor;
• the individual does not dispose of the interest within two years after receipt;
• the Fund’s assets as to which the profits interests relate are not “related” to a substantially certain and predictable stream of income; and
• services are rendered to or for the benefit of the partnership.

The foregoing conditions may affect various design issues required to be addressed in the context of implementing a carried interest arrangement. Notably, among the considerations that may arise is the possible failure to meet the two-year condition and the question of whether such a failure necessarily means that the interest fails to qualify as a profits interest. While the failure to meet any of the conditions could mean that the taxpayer cannot rely on Revenue Procedure 93-27, it may be argued that the ultimate impact of a disposition of a profits interest within two years can depend on the applicable facts and circumstances, including, for example, whether the disposition was contemplated at the time the interest was granted (as appears to have been the case in Diamond).

Revenue Procedure 93-27 does not expressly address how, or even whether, Section 83 applies to profits interests. Revenue Procedure 2001-43 clarifies the application of Revenue Procedure 93-27 to profits interests that are subject to vesting. Such interests will be deemed to have been transferred on the date of grant (notwithstanding that they may be subject to a risk of forfeiture following grant) for purposes of determining whether they qualify as interests only in profits of a partnership, provided that:

• the partnership and the service provider treat the service provider as the owner of the partnership interest from the date of its grant, and the service provider takes into account the distributive share of partnership income, gain, loss, deduction, and credit associated with that interest in computing the service provider’s income tax liability for the entire period during which the service provider has the interest;
• upon the grant of the interest or at the time that the interest becomes substantially vested, neither the partnership nor any of the partners deducts any amount (as wages, compensation, or otherwise) for the fair market value of the interest; and
• all other conditions of Revenue Procedure 93-27 are satisfied.

  Revenue Procedure 2001-43 does not explicitly provide that profits interests meeting the foregoing conditions are taxable under Section 83 principles. It does say that “taxpayers to which this revenue Procedure applies need not file an election under Section 83(b) of the Code.”

Capital Shifts and Book-Ups

The intersection of Subchapter K and Section 83 may also result in other capital account operational issues, including potential issues related to capital shifts and book-ups.

Under Section 1.721-1(b)(1) of the Treasury Regulations, a shift in capital among partners could be regarded as a taxable event both for the partner receiving capital and those deemed to transfer an interest, to the extent that the interest transferred includes unrealized gains. Absent careful design, where a carried interest arrangement involves participation by fund managers in a carry vehicle that has unrecognized gains, the addition of a new fund manager participant or the allocation of additional units could be deemed to result in a capital shift, depending on its impact on the capital account of fund managers under the organizational documents governing the carry vehicle.

Similarly, Subchapter K generally provides that a partnership may, and in certain cases must, mark to market the value of its assets, including where there is an issuance of new partnership units. Generally, a “book-up” is a revaluation of a partnership’s capital accounts based on the fair market value of the partnership’s assets. The book-up is not itself a taxable event, but, absent careful design, the partnership’s approach to accounting for partners’ capital accounts could cause complications, and unintentional tax results, in connection with the issuance of profits interests.

Practical and Design Considerations

Section 83(b) Elections

Generally, a person who receives “property” in connection with the performance of personal services is taxable under Section 83 in respect of that compensation at the earlier of the time that the property is no longer subject to a substantial risk of forfeiture or is transferable, based on the fair market value of the property at that time. Section 83(b) allows a service provider to elect instead to be subject to tax upon the earlier transfer of the property to it, prior to it becoming substantially vested or transferable, based on its fair market value at the time of transfer. Accordingly, making a Section 83(b) election can limit the extent to which a service provider might be subject to tax at ordinary rates on appreciation in the value of property that has been transferred. Because of the risks associated with compliance with the requirements of Revenue Procedure 93-27 and 2001-43, many practitioners generally advise clients to make protective Section 83(b) elections.

A Section 83(b) election allows the recipient of unvested “property” to include into income the value of the property upon transfer instead of including it into income at the time the property later vests (if it ever vests). The general idea behind a Section 83(b) election is to pay the tax at ordinary rates at a time at which it is presumed to have a lower value than at the time at which it is later scheduled to vest. As Section 1.83-2 of the Treasury Regulations indicates, the effect of a proper election is that “any subsequent appreciation in the value of the property is not taxable as compensation to the person who performed the services.”

Challenges can arise concerning whether the carry vehicle is the “right” service recipient for purposes of the Treasury Regulations under Section 83, even though there are places in the regulations that broadly refer to the grant of property in connection with the performance of services. In addition, the very nature of a profits interest even raises the question as to whether it is “property” for purposes of Section 83.

In addition, making an 83(b) election raises the question of how a profits interest should be valued for purposes of Section 83(b). Consistent with the outcomes in Campbell and in Revenue Procedure 2001-43, many practitioners take the view that a profits interest should be deemed to have a value of zero at the time of grant for purposes of Section 83.

Fee-Waiver Provisions

Many sponsors, and particularly private equity firms, waive current management fees from sponsored investment funds and, in return, take profits interests in the funds. Under a typical “management profits interest” arrangement, a sponsor’s general partner or investment manager entity will be deemed to have contributed capital in the amount of the waived fee and then be entitled to distributions equal to the capital contributed along with the investment return on such capital, but only to the extent that the Fund has sufficient net profits to support the distribution. This mechanism converts ordinary income (management fees) into capital gains (profit allocation), assuming that the underlying income consists of capital gains. The Fund must actually generate a sufficient level of profits to allocate to the service provider in order for the arrangement to have the intended tax effect. Fund managers then participate in this arrangement by being partners in the sponsor’s general partner or other entity having the investment in the Fund.

As described above, the Proposed Section 707(a)(2) Regulations, relating to disguised payments for services, were published in 2015 but have not been finalized. In the preamble, Treasury stated its view that the proposed regulations reflect the legislative intent in the statute and legislative history, and thus current law.

Section 707(a)(2) provides Treasury with broad authority to promulgate regulations involving disguised payments for services. In the legislative history, Congress expressed concerns that partnerships could inappropriately treat payments for services as allocations and distributions to a service partner even when the service partner acted in a capacity other than as a partner. The Proposed Section 707(a)(2) Regulations would provide six considerations that should be evaluated in determining whether or not a given arrangement should be regarded as a disguised payment for services. When comparing these factors to those articulated in the legislative history, only one is “new”: if there are different allocations or distributions with respect to different services, where the services are provided either by a single person or by related persons, whether the terms of the differing allocations or distributions are subject to significantly varying levels of entrepreneurial risk.

The preamble to the Proposed Section 707(a)(2) Regulations indicates that the most important factor is whether the payment is subject to significant entrepreneurial risk as to both the amount and fact of payment. The Proposed Section 707(a)(2) Regulations would provide that certain facts and circumstances create a presumption that an arrangement lacks significant entrepreneurial risk (unless other facts and circumstances establish the presence of significant entrepreneurial risk by clear and convincing evidence).

Tax Treatment on Repurchase or Disposition of Profits Interest or Payment in Liquidation of Profits Interest

Carried interest arrangements typically anticipate the possible sale, to the carry vehicle or one of its affiliates, or redemption of profits interests, as well as the possibility that the carry vehicle will make a payment in liquidation of the interest upon the sale of an underlying business or business asset. While there are differences in the tax analysis, and a substantial number of potential subtleties, depending on the nature of the monetization transaction, the tax results to the fund manager are typically not materially affected by the method. Generally, the fund manager recognizes capital gain in the amount of the proceeds, assuming that the profits of the partnership, and any unrealized appreciation in the assets of the partnership at the time of any disposition, are capital in nature. Discrepancies may occur in limited circumstances, however, including in respect of, for example, hot assets and holding periods for underlying capital assets.

Treatment of Profits Interest and Capital Interests As Separate Interests in a Partnership

Revenue Procedure 93-27 assumes that the profits interest does not include a capital interest at the time of grant. Concerned about the potential unavailability of Revenue Procedure 93-27 or simply out of an abundance of caution, some practitioners have separately advised that clients not only make prophylactic Section 83(b) elections, but also contribute some small amount of capital to the venture in order to bolster the argument that the 83(b) election relates to property.

Needless to say, the facts of a given arrangement do not always conform to the parameters of existing authority. Practitioners need to be mindful of the analytic tensions when a given arrangement may not fit squarely within the factual predicates of Revenue Procedure 93-27. Can a taxpayer, for instance, bifurcate a compensatory interest in a partnership or carry vehicle if it wishes to make a capital contribution? Section 1.704-1(b) (2)(iv)(b) of the Treasury Regulations indicates that one can only have one capital account, even if there are several interests held with respect to the partner’s interest. Additionally, some case law indicates the same, although it is in the context of general partner and limited partner interests, as opposed to profits and capital interests. It is noted that there is at least one private letter ruling that would appear to take a more flexible approach to the question, although it should likely be viewed with caution in light of the numerous other questions that remain unanswered.

Dual-Status Issue

Many partnerships use a disregarded entity (“DRE”) for partners that seek to provide services in both a partner and an employee context in connection with a particular business enterprise. Specifically, many partnerships will establish a wholly owned limited liability company and “check the box” under Section 301.7701-2 of the Treasury Regulations with the limited liability company effectively being “disregarded” as separate from the partnership entity owner. Many have historically entertained this structure because of the long­standing position of the IRS that a partner cannot be both an employee and a partner at the same time with respect to the same partnership. The use of a DRE was designed to allow the partner to be treated as an employee at the DRE level while remaining a partner at the partnership-owner level.

The classification of a given service provider as a partner or employee is important because partners are not subject to wage withholding but are subject to the application of SECA. Partners are also not permitted to participate in certain employee benefit arrangements that are available to employees.

In May 2016, Treasury published temporary and proposed regulations, since finalized, indicating that an upper-tier partnership’s use of a DRE will be insufficient to confer employee status on a partner of the partnership. The 2016 guidance notes that the entity classification regulations “did not create a distinction between a [DRE] owned by an individual (that is, a sole proprietorship) and a [DRE] owned by a partnership in the application of the self-employment tax rule.”

The use of a wholly owned DRE should therefore not alter the IRS’s historical view to the effect that:

(1) [b]ona fide members of a partnership are not employees of a partnership . . ., and (2) such a partner who devotes time and energy in the conduct of the trade or business of the partnership, or in providing services to the partnership as an independent contractor, is, in either event, a self-employed individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee.

In addition, it appears that Treasury and the IRS used this opportunity to reaffirm the regulatory hostility to dual status generally, whether or not in the DRE context. Thus, the preamble states that the revenue ruling is still good law and that dual-status relationships are generally not favored. Treasury and the IRS, however, indicated that there could be circumstances in which dual status may be appropriate:

The [IRS] solicited comments on the appropriate application of the [longstanding] principles [invalidating dual status for service providers that are partners] to tiered partnership situations, the circumstances in which it may be appropriate to permit partners to also be employees of the partnership, and the impact on employee benefit plans . . . and on employment taxes if [the longstanding guidance] were to be modified to also be employees in certain circumstances.

While the IRS has left open the possibility of future exploration on the topic of dual-status service providers, the discussion in the preamble should be troubling to proponents of the view that dual service arrangements are viable structures for service-based relationships.

Phantom Income

Partners in partnerships receive their allocable shares of partnership gain, loss, income, deduction, and other items of partnership income and credits. Partners receive distributions, however, pursuant to the governing terms of the partnership agreement. This means that in some circumstances, participants in a carry vehicle under a carried interest arrangement may be treated as having “phantom” income for tax purposes for certain years even if they do not in fact receive a distribution with respect to that income from the carry vehicle. Phantom income typically arises because of the operation of the distribution waterfalls to which the Fund is subject, although it can also be a function of Fund taxable income without free cash.

While the manager and its employees participating in any carried interest arrangement may have to wait to receive any carried interest, Fund documents or tax rules may require that the first dollar of profit (and each dollar thereafter) be allocated to all investors. This means that the manager, and, by extension, the fund manager participants, may be allocated items of income for tax purposes prior to receiving cash from the Fund to pay the necessary taxes.

Tax Distributions

The idea behind a tax distribution is that investors (including for this purpose, the manager and the fund managers) are entitled to receive distributions to permit them to pay necessary taxes arising from phantom income. The distribution is an exception to the normal Fund distribution waterfalls – in effect, an advance – and is provided even though the terms of the Fund would not otherwise permit it.

The drafting of tax distribution provisions typically requires business judgment concerning the following design variables:

• Should institutional investors, including potentially tax-exempt investors, share in tax distributions, or should such distributions be limited to the fund managers?
• Should the determination of whether sufficient cash has been distributed to fund tax obligations be determined on an annual or cumulative basis?
• Should distributions on capital interests be taken into account in determining the amount of tax distributions to be made in respect of profits interests?
• Should the amount of distributions be based on assumed or actual tax rates?
• If the amount of distributions is based on assumed tax rates, should the rates be the same for all participants, or should the rates be based on the jurisdictions in which the participant is based?
• Should there be a clawback of tax distributions in any termination situations or if the investment ultimately generates a loss?

Some may choose not to permit employees to receive tax distributions in advance of a scheduled employee vesting date. In other instances, a sponsor (or in some cases, the investors) may preclude – or  may be permitted to preclude – tax distributions above a certain threshold in the aggregate in order to reserve against the Fund’s future clawback obligations to its third-party investors.

Forfeitures

Interesting questions can arise as to the tax consequences associated with the forfeiture of any carry vehicle interest. While the authors are unaware of any direct guidance on point, some practitioners believe that a fund manager forfeiting a profits interest in a carry vehicle could be treated as having a capital loss, assuming that the carry vehicle and the individual treated it as a capital asset in the first instance. On the other hand, a strict reading of the Section 83 regulations leads to the view that any such loss is limited to the excess of the amount paid for the property (which, in most cases and for present purposes, is likely small) over the amount realized upon the forfeiture.

The forfeiture of a partnership interest in the hands of a service provider raises a number of knotty technical and commercial issues. For example:

Does the interest revert to the sponsor?

Is it recycled for future grants?

Is it automatically allocated pro rata among other participants in the carried interest arrangement?

What are the commercial goals of the sponsor, and how do they conform to the complexities involved with requiring compliance with Subchapter K with respect to the operation of the carry vehicle?

Capital shift considerations may be relevant in these circumstances. As described above, a capital shift occurs when current capital – as contrasted with future profits – is shifted from one partner to another, which can occur in a nonobvious way in connection with forfeitures.

Out of Profits

To qualify as a profits interest for tax purposes, profits interests must be granted with a liquidation value of $0. Some private equity sponsors may increase the profits-interest hurdle above the liquidation value (e.g., $10) to incentivize a desired return to investors before employee participation in any positive economics. This arrangement can be thought of as similar to a premium stock option, where a company grants an option to purchase shares at a strike or exercise price above its fair market value on the grant date.

Profits interests may also be structured as “catch-up” units, which allow participants to share in a disproportionate amount of the profits until the “right” level of participation percentage is achieved. In some cases, this “catch-up” may be pursuant to a business arrangement intended to give new hires a share in the pre-grant value of the business.

While disproportionate allocations, and, indeed, the basic idea of a profits interest, can mean that profits will not be allocated to partners in the partnership in proportion to their contributions to capital; that does not necessarily mean that the allocations raise issues under the “substantial economic effect” rules of Subchapter K. To the contrary, those rules generally are intended to ensure that tax allocations and real economic impacts are correlated, rather than that profit allocations are correlated with capital contributions.

The definition of profits under Subchapter K of the Code can raise its own interpretative challenges, and it is always important to make sure that tax and compensation professionals coordinate when structuring carried-interest arrangements. Some may take an expansive view that almost all proceeds from a partnership can constitute profits for these purposes, while others may take a more cautious approach. Similarly, care should be taken in drafting the carried-interest provisions of partnership agreements to ensure that carried-interest partners are not entitled to distributions other than out of profits. The waterfall provisions of such agreements are frequently complex, and the interaction between the distribution and tax-allocation provisions can give rise to unintended consequences that in theory might even risk the disqualification of an interest that is intended to qualify as a profits interest.

Clawbacks

Many carried interest arrangements provide for a clawback of distributions previously made when early gains are offset by future losses in investment assets. These provisions can raise not only practical issues concerning enforcement, but also may possibly give rise to uncertain tax treatment of the amounts required to be repaid by the carried-interest partners.

Administration

In comparison to Phantom Carried Interest Arrangements, some believe that carried-interest arrangements can be harder to administer because the arrangement has to flow through the carry vehicle or other Fund documents. Many also find it hard for some fund managers who are accustomed to being treated as employees to be treated as partners for tax purposes. The need to file Forms K-1 may be more difficult for some fund managers who are not familiar with partnership protocols. For many fund managers accustomed to W-2 wage reporting, the enhanced requirements and inherent complexities of Form K-1 can result in some initial dissonance and, in some instances, even economic dislocation owing to the nature of phantom income.

In addition, being treated as a partner for tax purposes also means that the individual once accustomed to participating in certain health and welfare arrangements open to employees – such as Section 125 plans and certain other exclusions – may be unable to do so without proper planning. Many may find that health insurance may cost more as the employer and employee portions of healthcare are allocated to the fund manager. Separately, there is also an impact on calculations for purposes of cash or deferred arrangements under tax-qualified plans such as Section 401(k) plans.

Award agreements evidencing a grant are common under both arrangements, but fund managers must technically be “members” of the relevant carry vehicle to benefit. This may also raise a number of commercial considerations from the standpoint of the sponsor. A sponsor may be concerned that it will have to provide information and voting to fund managers as if they were invested in the underlying Fund. While the Fund members are technically treated as partners from a tax perspective, the concerns are often overstated and can be addressed through the partnership or limited liability company agreement. The provisions of state law governing the arrangement will be important to consult for these and similar issues.

Conclusion

Carried Interests can often align management and investor interests. Given the technical sensitivities across multiple legal regimes and competing commercial designs, however, practitioners need to attend with great care to the many tax and related considerations associated with the design and implementation of these arrangements.

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Arthur H. Kohn is a partner in Cleary Gottlieb’s executive compensation and ERISA practice. His practice focuses on compensation and benefit matters, including executive compensation, pension compliance, and investment, employment law, and related matters.

Andrew L. Oringer is the co-chair of Dechert’s ERISA and executive compensation group. He is the co-chair of the Employee Benefits Committee of the American Bar Association’s Business Section, the Emerging Issues Coordinator of the Employee Benefits Committee of the American Bar Association’s Section of Taxation, and chair of the New York State Bar Association’s Committee on Attorney Professionalism. He is a Fellow of the American College of Employee Benefits Counsel, a Senior Fellow from Practice for the Regulatory Compliance Association and an adjunct professor at the Maurice A. Deane Law School at Hofstra University. Mr. Oringer is highly rated by a number of key ranking organizations, is included in a widely disseminated list of the Top 100 lawyers in New York City across all practice areas and is a member of The Legal 500 Hall of Fame.

Steven W. Rabitz is a partner in Dechert’s ERISA and executive compensation group. He focuses his practice on the fiduciary responsibility, prohibited transaction, and funding rules of ERISA, specifically how they relate to financial products and services, U.S. federal income tax, securities, and other legal matters concerning compensation and benefits. In addition, Mr. Rabitz assists clients on how ERISA rules are applicable to the design, implementation, and ongoing operation of retirement and health benefits. Mr. Rabitz advises clients such as broker-dealers, futures commission merchants, banks, investment managers, trustees, mutual fund complexes, alternative fund sponsors, and other financial market participants on the conduct of their businesses as applied to U.S. retirement clients. He also represents both private and public companies in a variety of matters involving compensation and benefits, as well as cross-border related considerations.