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Charles Crain

MasterCraft CEO Joins New SEC Advisory Committee

By | General | No Comments

This week, the SEC launched a new Small Business Capital Formation Advisory Committee to ensure that emerging companies have a voice in SEC decision-making. One of the founding members of the Advisory Committee, as announced this week, will be Terry McNew, President & CEO of MasterCraft Boat Holdings. MasterCraft is an 882-employee boat manufacturer based in Vonore, Tennessee.

Established pursuant to the SEC Small Business Advocate Act of 2016, the Advisory Committee will work with the SEC’s Advocate for Small Business Capital Formation (a position also created by the Act) to advise the SEC on problems that small businesses have in securing access to capital, identify areas in which small businesses and their investors would benefit from changes to existing rules and regulations, and propose appropriate reforms to the SEC and Congress.

Mr. McNew will bring a strong manufacturing voice to the Advisory Committee, building on his 31 years of experience in the marine manufacturing industry. Prior to joining MasterCraft in 2012, he was the Executive Vice President of Product Development & Engineering, Manufacturing, and Quality for the Brunswick Recreation Boat Group.

The NAM congratulates Mr. McNew on his exciting new role, and manufacturers look forward to the SEC taking steps to incorporate the Advisory Committee’s expertise into future decisions that impact capital formation and job creation at small businesses across the country.

House Ways & Means Approves NAM-Supported IRS and Pension Reforms

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IRS reform and retirement savings legislation passed yesterday by the House Ways & Means Committee included several key policy wins for manufacturers that will enhance retirement security for manufacturing workers and ensure fair treatment for manufacturers in their interactions with the IRS.

  • The Setting Every Community up for Retirement Enhancement (SECURE) Act will allow the IRS to take steps to authorize Open Multiple Employer Plans (MEPs), which would make it easier for small businesses to offer retirement benefits to their employees. Under an Open MEP, small businesses connected by either geography or industry would be able to band together through a trade association or local business group to offer a single retirement plan for their employees – reducing the cost of offering retirement benefits and thus allowing growing companies to better attract and retain skilled workers.
  • The SECURE Act will also make it easier for longer service employees to stay in a company’s existing defined benefit pension plan even as new workers join a defined contribution 401(k) plan. This targeted reform will allow companies to provide competitive retirement benefits to all employees, regardless of their tenure.
  • The Taxpayer First Act includes important reforms that protect taxpayers’ rights when interacting with the IRS. The bill would ensure that companies retain a right to appeal IRS decisions to the agency’s Office of Appeals rather than being forced into Tax Court. It would also create safeguards around certain IRS procedures, including limiting the agency’s use of so-called “designated summonses” (which can be used to extend the statute of limitations on audit issues) and preventing the IRS from allowing external contractors to review confidential taxpayer information.

The NAM has spoken out in favor of these reforms that will protect taxpayers and retirees. In recent months, we have called on Congress to enact the IRS and pension reforms approved by Ways & Means yesterday; we also submitted a comment letter to the DOL to guide the implementation of its Open MEPs proposal. Manufacturers applaud Chairman Neal and Ranking Member Brady for taking steps to advance these important bipartisan proposals.

Senate Banking Committee Hearing Today Highlights Bipartisan Interest in Proxy Issues

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Today, continuing to build on its momentum from the end of last Congress, the Senate Banking Committee held its fourth hearing in less than a year on ways that policymakers can ensure that the proxy process is working efficiently for both public companies and their investors. The Committee’s continued focus on proxy issues is a clear indicator that Congress understands the impact that these rules can have on company policies and investor returns – and that there is growing interest in Washington to finally make bipartisan progress toward reforms that will improve proxy voting and safeguard middle-class Americans’ life savings.

A well-functioning proxy process allows companies to engage with their shareholders and work collaboratively to make decisions in the long-term best interests of the company and its investors. In recent years, however, manufacturers and their shareholders have experienced increased intrusions into the proxy process from third parties that have little-to-no stake in a company’s success. Manufacturers now must contend with single-issue activists pursing agendas disconnected from long-term value creation and proxy advisory firms seeking to institute one-size-fits-all standards through their voting recommendations, which can be tainted by conflicts of interest and riddled with errors.

Today’s hearing comes at an auspicious time, as the SEC is currently reviewing the outsized influence that these unregulated actors have on the corporate governance policies of U.S. public companies and the life savings of millions of Main Street investors. In fact, SEC Commissioner Elad Roisman – the SEC’s point person on the proxy process – gave a speech earlier this month outlining many of the issues discussed at today’s Banking Committee hearing.

These are all encouraging steps, and manufacturers are ready to work with policymakers to address these important proxy issues. Earlier this year, the National Association of Manufacturers sent a letter to the SEC with proposed solutions to guide its ongoing policymaking process; today, we submitted those comments to the Banking Committee as part of the hearing record. Manufacturers remain optimistic that Washington can come together in a bipartisan manner around commonsense solutions that provide for effective oversight of proxy firms, enhance the quality of information available to shareholders, and protect America’s Main Street investors.

NAM Comments on Proposed DOL Association Retirement Plans Rule

By | Shopfloor Legal, Shopfloor Policy | No Comments

When the Department of Labor (DOL) announced last fall that it was proposing a rule that would make it easier for small businesses to offer retirement benefits to their employees, the NAM praised the decision, calling it “a significant step toward allowing small manufacturers to use competitive 401(k) plans to attract talent in a tightening labor market.” Now, the NAM has partnered with the American Society of Association Executives (ASAE) to submit official comments to help DOL implement its proposed Association Retirement Plans (ARP) rule.

Under the DOL’s ARP proposal, small businesses connected by either geography or industry would be able to band together through a trade association or local business group to offer a single retirement plan for their employees – reducing the cost of offering retirement benefits and thus allowing growing companies to better attract and retain skilled workers.

Employees at small businesses constitute the backbone of our national workforce, and they face an imminent retirement savings crisis. Just 53 percent of workers at companies with fewer than 100 employees have access to a workplace retirement plan, and only 37 percent of small business workers participate in such a plan. Reducing the costs for smaller employers offering a 401(k) will bolster retirement savings for hard-working Americans across the country.

In the comment letter, the NAM and ASAE urged the DOL to clarify that members of manufacturing associations qualify as sharing a common interest under the rule, remove state-level barriers to employer participation in an ARP, and ensure the long-term stability of the program. We also asked the DOL to move quickly toward implementation so that small manufacturers and their employees can benefit from these important reforms in the near term. Once finalized, the ability of employers to offer ARPs will help ensure the financial security of American workers and support a thriving manufacturing workforce.

House Tax Package Includes NAM-Supported Pension Reforms

By | Shopfloor Policy, Taxation | No Comments

In late November, House Ways and Means Committee Chairman Kevin Brady (R-TX) unveiled a package of tax extenders and technical corrections to last year’s landmark tax reform legislation. Included in the bill is a pension provision that will make it easier for manufacturers to offer competitive retirement benefits to their employees.

When companies transition from a traditional defined benefit (DB) pension plan to a defined contribution (DC) 401(k) plan, many businesses grandfather longer service employees into the existing DB pension and offer the new 401(k) only to new employees. This allows existing employees to remain in their longstanding pension plan as they near retirement.

This approach, called a “soft freeze,” allows companies to provide competitive retirement benefits to all employees, regardless of their tenure. However, over time, these plans can trigger IRS nondiscrimination rules as the employees in the DB plan continue to increase in both time served and compensation relative to the newer employees in the DC plan. This can lead to companies being forced to institute a “hard freeze” on the plan, meaning that employees miss out on their prime years of benefit accruals.

Chairman Brady’s legislation provides an alternative solution that would modify the nondiscrimination rules to allow plan sponsors to protect grandfathered employees when transitioning from a DB to a DC plan structure. Provided that the plan does not violate any nondiscrimination rules when it is set up and no significant changes are made going forward (other than changes in employees’ employment status and/or compensation), it would not violate nondiscrimination rules as the longer service DB employees advance through their career.

This targeted reform would prevent companies from unintentionally violating the nondiscrimination rules, allowing manufacturers to compensate employees competitively and attract talent in a tightening job market. The NAM signed a coalition letter supporting this change, which is modeled after bipartisan legislation introduced by Reps. Pat Tiberi (R-OH) and Richard Neal (D-MA) and Sens. Rob Portman (R-OH) and Ben Cardin (D-MD). The National Association of Manufacturers will continue to advocate this important reform as the tax bill moves through Congress.

NAM Drives the Agenda for SEC Proxy Roundtable

By | General | No Comments

Large institutional investors help Americans invest for retirement by managing their life savings and making proxy voting decisions on behalf of the millions of Americans with shares in a mutual fund, 401(k) or pension plan. Yet, these fund managers, duty-bound to act in middle-class Americans’ best interests, have instead been relying on unregulated, conflicted “proxy advisory firms” to shape these important decisions.

In a new comment letter submitted to the Securities and Exchange Commission (SEC) this week, the National Association of Manufacturers lays out the many flaws intrinsic to the proxy advisory firm business model and urges the SEC to take action to ensure that investment managers are acting in Main Street investors’ best interests when making proxy voting decisions.

Proxy firms have expanded their influence in recent years, and they are not shy about using their power to impact public company decision-making. Yet, their one-size-fits-all view of the world does not always align with what is best for manufacturers or Main Street investors, and their recommendations to investment managers are often riddled with errors and conflicts of interest.

The SEC is hosting a roundtable on the proxy process in November, and a key discussion item will be the role that proxy firms play in the marketplace given the outsized influence these firms have on company decisions that impact the savings in millions of Main Street investors’ retirement accounts. In our comment letter, we call for targeted reforms that would allow proxy firms to continue to provide advice to investment managers—but under increased oversight from the SEC and improved due diligence from institutional investors.

By taking concrete action to address these important issues, the SEC can ensure that investment managers, proxy firms and public companies alike remain exclusively focused on delivering returns for middle-class Americans investing for a child’s education, a new home or a secure retirement.

Labor Department Takes Significant Step to Reduce the Cost of Retirement Plans for Small Manufacturers

By | Shopfloor Main | No Comments

Earlier this year, President Donald Trump issued an executive order requiring the Department of Labor (DOL) to take steps to expand the ability of small businesses to join with other companies to offer a single retirement plan for their employees, effectively reducing the cost of offering retirement benefits. Today, the DOL released a proposed rule to implement the executive order and enable small businesses to join with industry or local partners via a business association to offer retirement benefits to their employees.

A manufacturer that wants to offer its employees retirement benefits must address substantial administrative costs associated with such plans, which makes it difficult for small businesses to offer these benefits. In fact, less than half of American workers at companies with fewer than 50 employees have access to a workplace retirement plan.

The DOL’s proposal would reduce costs by allowing similarly-situated small businesses (connected by either geography or industry) to band together through a trade association or local business group to offer a single retirement plan, thus benefiting from economies of scale.

While additional rulemaking from the Treasury Department is necessary to fully implement these “pooled” retirement plans, the DOL’s action is a significant step toward allowing small manufacturers to use competitive 401(k) plans to attract talent in a tightening labor market. It’s also fantastic news for manufacturing workers. The higher fees charged by administrators of small employer plans can cut nearly 1 percent off a worker’s retirement savings. Compounded over a lifetime of investing, that’s a significant loss, which will be eliminated under the new rule. That’s a win for manufacturing workers across the country.

SEC Withdraws Proxy Firm No-Action Letters

By | General, Shopfloor Main | No Comments

Investment advisers owe a fiduciary duty to the middle-class Americans whose retirement accounts they manage. Their decisions on how to vote an investor’s shares in corporate proxy contests must be guided by the investor’s best interests. But how can an investment adviser guard against any conflicts of interest that he or she may have and ensure that all proxy voting decisions are made in the best interest of the investor? It’s a good question, and one that helps explain why actions taken last week by the Securities and Exchange Commission (SEC) are so important.

Back in 2004, the SEC issued two so-called “no-action” letters that allowed investment advisers to simply outsource proxy voting decision-making to third-party proxy advisory firms to mitigate their own potential conflicts of interest. What those no-action letters failed to account for, however, were the many shortcomings and, worse, conflicts of interest embedded in the proxy advisory firms’ business models.

The practical effect of the no-action letters was, for more than a decade, to entrench and empower these unregulated, black box proxy advisory firms. Millions of Main Street investors are unaware that these important decisions have been outsourced to conflicted third parties, so the National Association of Manufacturers (NAM) has for years called on the SEC to withdraw the 2004 no-action letters. Last week, that’s just what the SEC did.

The SEC’s decision will restore the primacy of a fund manager’s fiduciary duty to protect investors’ retirement savings and also reduce proxy firms’ influence over manufacturers and the important decisions that guide company growth, job creation and economic expansion in America.

NAM President and CEO Jay Timmons released a statement last week praising the decision and calling for further oversight of proxy firms. The SEC’s announcement is a precursor to further discussion of these important issues at its proxy roundtable in November, where the NAM will continue to advocate corporate governance policies that bolster capital formation for manufacturers and strengthen the long-term interests of Main Street investors.

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