Promoting, protecting, and researching the optimal use of incentives, corporate gifts, rewards, recognition, promotional products and related promotions in business.

 Current Legal/Legislative Updates

Circuit Court Overturns Department of Labor Fiduciary Rule

On March 15, 2018, a panel of the Fifth Circuit Court of Appeals struck down the fiduciary rule in a 2-1 decision.  See Chamber of Commerce of the United States of America v. Dep’t of Labor, No. 17-10238 (5th Cir. Mar. 15, 2018).  The decision is sweeping in that it rejected the rule that redefined fiduciary investment advice, as well as the new prohibited transaction exemptions, and the modifications to old exemptions adopted along with the rule.

As reported in past months on this website and in other communications by the Incentive Federation the fiduciary rule, issued by the Department of Labor in 2016 and originally scheduled to be implemented by January 2018, had significant implications for companies offering incentive travel and awards programs to the financial marketplace. As we reported in 2017, unless the current administration changed the course of the rule, the new “fiduciary” rule may well make incentive programs a thing of the past for those selling financial products to the public.

George Delta, Esq., the Federation’s legal counsel, has provided an update on the status of the fiduciary rule given the District court’s recent action. Interesting, another Circuit court, in an unrelated case, has upheld the fiduciary rule, perhaps setting up an appeal to the Supreme Court. Read Delta’s latest Washington Update here and his earlier description of the impact of the fiduciary rule in 2017.

Supreme Court Agrees to Hear State Case Requiring Out-of-State Vendors to Collect Use and Sales Taxes

Two states, Alabama and South Dakota, passed new sales tax regulations within the past two years  with the strategy to have the Supreme Court eventually rule on the legitimacy of the regulations.

The strategy of the states has finally paid off because on January 12, 2018 the Supreme Court agreed to hear South Dakota v. Wayfair, Inc., a case challenging the constitutionality of South Dakota’s newly enacted sales and use tax law.  Now we shall see if the Supreme Court is willing to acknowledge the changed and ever-changing nature of retail sales.

Within a few months, the Supreme Court can decide once and for all the circumstances under which states may impose sales and use tax collection obligations on remote sellers.  While the outcome of the South Dakota v. Wayfair, Inc. case is far from certain, the Supreme Court may be prepared to modernize its state sales and use tax jurisprudence and do away with the outmoded physical presence requirement.  As a result, remote sellers may soon find themselves treated the same way as brick and mortar retailers when it comes to collecting sales and use taxes. The implications for incentive industry companies is obvious. For background on this issue read George Delta’s latest Washington Update prepared exclusively for the Incentive Federation.

Please click on the Legal/Legislative/Regulatory tab above to see all the other issues the Federation followed and reported on this past year.

Current Research

U. S. Federal Regulations and Non-Cash Awards

In 2017, to develop a baseline understanding of the awareness, understanding, and
accommodations of U.S. businesses regarding regulations impacting reward and recognition
programs, the Incentive Research Foundation launched its inaugural Regulations Signature
Study, with results released in January 2018. The research examined program owners’ understanding of the regulatory environment, generally as well as in relation to six key regulations1 (DOL Fiduciary Rule, 274j, OSHA, FLSA, Fair Market Value, and Sweepstakes/Lottery).

The survey was designed and executed by Intellective Group during the summer of 2017 to a cross-section of 419 businesses, 106 operating in the financial services sector. Program owners were targeted based on sector and revenue size: $5 – $9.9 million, $10 to $99 million, $100 to $999 million, and $1 billion or more. The findings are weighted by revenue size, and are statistically representative of the population of U.S. businesses with a 95% confidence level and a 5% margin of error.

General Understanding of Regulations

 Most program owners understand their reward and recognition activities are impacted by the
regulatory environment, but aren’t really sure how. While 67% of program owners are aware there are regulatory considerations for their programs, only 38% consider themselves very knowledgeable about those regulations and tax requirements. For the smallest businesses surveyed ($5 – $9.9 million in annual revenue), awareness drops by ten percentage points to 57%.

Despite this, program owners are confident that their companies have identified and addressed any relevant regulations. Only financial services firms and small businesses indicate lower confidence – specifically regarding a detailed understanding of the requirements and the consequences of non-compliance. Regardless of their confidence, fewer than two-thirds of U.S. businesses have formal mechanisms and structures in place to ensure their programs remain compliant with regulatory and tax requirements. While the program owner has some responsibility for compliance, many also look to their legal or compliance teams for guidance, particularly in large firms (over $1 billion). The most common structural oversight tool is regular reviews of non-cash programs, with 62% of businesses using this as a compliance device.

To learn more about this study and to also see a Legal Issues Primer related to the study, click here.

2016 Incentive Marketplace Estimate Research Reports 17% Growth Since 2013

Conducted in partnership with market research firm Intellective Group of St. Louis, the study measures the expenditures of businesses for non-cash rewards for employees, customers and partners. The results update studies from previous years and provide details about expenditures spent on gift cards, rewards points, travel, and merchandise by corporate America. New this year, the study also focuses on the number of program owners using award points.

The study of a cross-section of US businesses confirms that award points, gift cards, incentive travel, and merchandise are commonly-used tools for firms seeking to reward and recognize their employees, sales teams, channel partners, and customers. Key findings from the study include:
• 84% of U.S. businesses use non-cash rewards to recognize and reward key audiences in the form of award points, gift cards, incentive travel, and merchandise – up from 74% in 2013
• In 2015, U.S. businesses spent $90 billion on these types of non-cash rewards, a 17% increase from $77 billion in 2013. To see the full research report click here.
Additional inquiries may be sent to IFI’s Managing Director, Steve Slagle.

2015 Incentive Federation Program Design and Support Study Released 

IFI engaged Intellective Group of St. Louis to conduct its 2015 Program and Design Study.  Using a national sample of business stakeholders with at least $1M in revenue, the study aimed to determine the drivers of programs, award types, supplier use and program metrics.  The full study may be reviewed here.  Additional inquiries may be sent to IFI’s Managing Director, Steve Slagle.

2015 Incentive Federation Program Design and Support Study Waterfall Release #1 – Program Goals and Objectives

IFI has released the first of a series of white papers on its 2015 Incentive Federation Program Design and Support Study.  In this white paper, the Federation focuses on an in-depth analysis of program goals and objectives companies strive to achieve when designing an incentive program.  Review the Program Goals and Objectives white paper here.

2015 Incentive Federation Program Design and Support Study Waterfall Release #2 – Communication, Technology and Tools

IFI has released the second of a series of white papers on its 2015 Incentive Federation Program Design and Support Study.  In this white paper, the Federation focuses on an in-depth analysis of how companies utilize communication, technology, tools and reporting within their incentive programs. Review the Communications, Technology, Tools & Reporting white paper here.

2015 Incentive Federation Program Design and Support Study Waterfall Release #3 – Award Program Spending

IFI has released the third in a series of white papers on its 2015 Incentive Federation Program Design and Support Study.  In the latest release, IFI puts the spotlight on program spending.  Click here to learn more.

2015 Incentive Federation Program Design and Support Study Waterfall Release #4 – Engaging Outside Program Support

IFI has released the fourth in a series of of white papers on its 2015 Incentive Federation Program Design and Support Study.  In the latest release, IFI puts the spotlight on engaging outside program support.  Click here to learn more.