Employee Benefits Law Report

Tag Archives: Executive Compensation

Tax-Exempt Organizations: understanding the proposed Tax Reform Act of 2014’s penalties on excessive executive compensation

Recently, we published an article in Bloomberg BNA’s Pension & Benefits DailyTM that provides context for understanding the proposed Tax Reform Act of 2014’s penalties on excessive executive compensation for tax-exempt organizations and offers our thoughts about planning opportunities for the future. This is available for our readers at this link.…

Accelerating Incentive Pay From 2013 to 2012 — Executive Compensation Planning for the Fiscal Cliff

Because of the pending fiscal cliff and the possibility of higher tax rates coming in 2013, we have been asked if private company employers should accelerate payments of incentive compensation into 2012, rather than pay them in 2013. This strategy may sound tempting to executives given all of the headlines of the fiscal cliff and potentially higher tax rates on high-wage earners. Still, a lot can happen between now and December 31st. To determine the appropriate tax planning strategy, employers should take the following steps.

  1. Have a Discussion With Key Executives. Your key executives are probably concerned about the

The Top-Hat Plan Test for Your ERISA Executive Deferred Compensation Plan – Daft v. Advest, Inc.

A recent Sixth Circuit decision provides a tutorial on designing and administering an ERISA executive compensation top-hat plan. In Daft v. Advest, Inc., a U.S. Court of Appeals for the Sixth Circuit reversed the District Court’s decision that the executive compensation plan was an ERISA plan but was not a top-hat plan, on the grounds that the District Court should have remanded the matter to the plan administrator for expansion of the administrative record and its own determination on this issue. This is good news for the employer, and presumably good news for the other plan participants, because an …

Public Companies Need to Review Equity Compensation Arrangements ASAP

In our recent blog about public equity compensation arrangements, we noted inconsistencies regarding the effective date of new guidance. The IRS and Treasury subsequently corrected the 162(m) guidance, and based upon this correction, we reaffirm that public companies need to review their equity compensation arrangements as soon as possible to minimize potential negative tax ramifications.

Public Companies Granting Stock Options and SARs to Covered Employees

Under existing Treasury regulations, certain equity compensation arrangements are exempt from the $1 million compensation deduction limit under Code Section 162(m), provided that a limit on the awards is stated. It appears that when the …

Public Companies May Need to Amend Stock Option Plans Soon to Qualify for Exception to $1 Million Compensation Deduction Limit

Publicly traded companies may need to act quickly to review, and, if necessary, amend their stock option and stock appreciation right (“SAR”) plans in order to preserve tax deductions for compensation in excess of $1 million paid to certain executives. The reason for this review is that the Internal Revenue Service (the “IRS”) and the United States Treasury Department recently issued proposed regulations that clarify a few items with respect to the application of Section 162(m) of the Internal Revenue Code (the “Code”) to such plans. One item relates to requirements that stock options and SARs must meet to qualify …

Have You Done a 409A Review of Your Executive Compensation Arrangements This Year?

Executives are at risk of early income inclusion, a 20% penalty tax, and interest charges if their compensation arrangements violate the evolving guidance under Internal Revenue Code Section 409A, which means that it is important to periodically review these arrangements. If you have not already done so, you should review your executive compensation arrangements in light of the guidance under Notice 2010-80, in which the IRS expanded its explanation of provisions that it deems to violate Section 409A.

The good news is that through this Notice, the IRS has expanded the ability of employers to correct errors in different types …