Headlines about "Executive benefits"
Gathered from the web by the editors at BenefitsLink.com.
Private Pensions: Sponsors of 10 Underfunded Plans Paid Executives Approximately $350 Million in Compensation Shortly Before Plan Termination
Excerpt: "To identify case study examples GAO analyzed a listing of the 1,246 underfunded plans that were terminated from 1999 to 2008 and selected public companies with large unfunded liabilities, large unfunded liabilities per participant, and a large number of plan participants. GAO reviewed documents provided by companies and executives, and interviewed PBGC and company officials. GAO also reviewed Securities and Exchange Commission (SEC) filings and PBGC documents disclosing plan underfunding at the time of termination and missed contributions. Executive compensation figures may be understated because some company executives could not be located, did not respond to document requests, declined interviews, and did not give GAO access to their tax records." (U.S. Government Accountability Office)
[Guidance Overview] Section 409A Reporting Required This Year for Plan Document Violations, Including Outstanding Discounted Options
Excerpt: "We expect there to continue to be very little code Z reporting in 2009 due, in part, to the IRS's correction program in Notice 2008-113 for operational violations. However, one type of Code section 409A income that will need to be reported this year is the section 409A income from any outstanding discounted options. While most discounted options were corrected or exercised during transition, there may still be some outstanding. The spread on any such options outstanding as of the end of 2009 will need to be reported as code Z income. This will require a careful review of Notice 2008-113, as well as the more detailed guidance in the proposed regulations, and consideration of whether and how the employer will obtain the associated withholding taxes in connection with the Code section 409A income." (Miller & Chevalier Chartered)
Code Sections. 409A and 457A Present M&A Issues, Treasury Official Notes
Excerpt: "Practitioners doing due diligence in mergers and acquisitions (M&A) transactions have been among the first to identify issues under Code Secs. 409A and 457A that may require further guidance, observed Treasury Deputy Benefits Tax Counsel Helen Morrison. Speaking on an executive compensation panel at the Practising Law Institute's (PLI) 'Tax Strategies for Corporate Acquisitions, Dispositions, Spin-Offs, Joint Ventures, Financings, Reorganizations & Restructurings 2009,' in New York on October 28, 2009, Morrison reviewed the Treasury's guidance plans under Code Secs. 409A and 457A." (Wolters Kluwer)
As Pensions Were Abandoned, Four Firms Paid Top Executives $49.5M in Benefits
Excerpt: "Top executives at four companies that jettisoned their employee pension plans received $49.5 million in retirement and severance benefits in the years before the companies filed for bankruptcy, while retirees saw their benefits cut by as much as two thirds, congressional investigators conclude in a report to be released today. The Government Accountability Office (GAO) reports that pensions at the companies, United Airlines, US Airways, Polaroid and Reliance Insurance, were underfunded by more than $11 billion when the companies turned them over to a government-backed insurance fund. The report says executives at those four companies and six others that abandoned their pension plans took in a total of $350 million in pay and perks in the years leading up to the bankruptcies." (USA TODAY)
Health Care Reform Bill Would Restrict Health Insurers' Compensation
Excerpt: "A provision in America's Healthy Future Act, passed by the Senate Finance Committee on Oct. 13, would limit deductible compensation for health insurers. If the provision makes it into the final legislation, it will establish a special rule under section 162(m) to cut the deductible compensation limit in half -- from $1 million to $500,000 -- for 'covered health insurance providers.' The provision is targeted at the health insurance industry -- employers with self-insured plans are excluded." (Watson Wyatt Worldwide)
Governance and Compliance Advisory Update: November 2009
Excerpt: "October saw significant activity with respect to retirement, executive compensation, welfare and other benefit legislation, regulations and rulings." (Towers Perrin)
Executive Compensation and Corporate Governance Provisions in Restoring Financial Stability Act of 2009 (PDF)
3 pages. Excerpt: "On November 10, 2009 Senator Christopher Dodd and eight other members of the Senate Committee on Banking, Housing and Urban Affairs (Senate Banking Committee), including Senator Charles Schumer, introduced the Restoring Financial Stability Act of 2009, which wasreferred to the Senate Banking Committee. Although the vast majority of the bill relates to financial services reform, it includes executivecompensation and corporate governance provisions, many of which are similar to provisions in the Corporate and Financial Institution Compensation Fairness Act of 2009 (H.R. 3269)1 that was approved by the House on July 31, and the Shareholder Bill of Rights Act of 2009 (S. 1074) that was introduced on May 19 by Senator Schumer. Both H.R. 3269 and S.1074 have been referred to the Senate Banking Committee." (Frederic W. Cook & Co., Inc.)
[Official Guidance] Text of Final IRS Section 6039 Regs Affecting Information Reporting Requirements for Statutory Stock Options
6 pages. Excerpt: "These final regulations will apply as of January 1, 2007. However, taxpayers are not required to comply with the return requirements of Sec. 1.6039-1(a) and (b) of these final regulations for stock transfers that occur during the 2007, 2008 and 2009 calendar years. Notwithstanding the waiver of the return requirements for 2007, 2008 and 2009 stock transfers, taxpayers must furnish information statements to employees for such stock transfers." (Internal Revenue Service)
Pay Czar Reduces Executive Pay for Firms Receiving Exceptional TARP Assistance
Excerpt: "In an effort to tie compensation more closely to long-term performance and appropriate competitive levels, Special Master for TARP Executive Compensation Kenneth R. Feinberg has directed companies that received exceptional Troubled Asset Relief Program assistance to cut compensation for top executives by an average of 50 percent. While the pay cuts apply to only seven firms, the levels and structures could become a template for compensation at other financial institutions that participate in TARP. Feinberg also clarified that these firms are subject to the same corporate governance provisions that apply to other TARP recipients, including say-on-pay votes, clawbacks, compensation consultant disclosures, risk reviews, perquisite disclosures, prohibition on tax gross-ups and chief executive officer/chief financial officer certifications." (Watson Wyatt Worldwide)
[Guidance Overview] Tax and ERISA Implications of Non-Qualified Non-Equity-Based Incentive Arrangements for Closely Held C-Corporations
Excerpt: "The most favorable tax treatment of deferred compensation is generally found by way of qualified plans. However, the uniform treatment of eligibility, vesting, accrual and funding, demanded by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (IRC) severely limits an employer's ability to reward its employees in proportion to their particular value to the company. Non-qualified deferred compensation arrangements (NQDCs) are one way around this limitation." (ERISA SHMerisa!)
SEC Says No More Lenience on Pay Disclosure
Excerpt: "After three years of reviewing companies' pay disclosures, the Securities and Exchange Commission appears to be running out of patience. Since late 2006, when the SEC revamped its guidelines for disclosing information on the compensation of top executives, the regulator has been sending out comment letters to companies whose disclosures they consider insufficient. These companies have been asked to do a better job next time or to provide additional information in a response letter." (CFO.com)
[Guidance Overview] Executive Employment Agreements and Bonus Plans May Need to Amendment to Comply with Revenue Ruling 2008-13 (PDF)
Excerpt: "Companies subject to the $1 million compensation deduction limitation that rely on the performance-based compensation exception should review all incentive compensation plans and any employment agreements or other arrangements that may result in the payment of at least $1 million to ensure compliance with Revenue Ruling 2008-13 before the start of the new performance period." (Bryan Cave LLP)
[Guidance Overview] California Supreme Court Upholds Forfeiture of Incentive Compensation (PDF)
4 pages. Excerpt: "In a closely watched case involving the Smith Barney Capital Accumulation Plan, the California Supreme Court has ruled unanimously that state law does not prohibit an employer from forfeiting an employee's incentive compensation when the employee quits or is terminated for cause before the date that the compensation vests. Schachter v. Citigroup, Inc., No. S1611385, 2009 Cal. LEXIS 11056 (Nov. 2, 2009). But in dicta, the court suggested an exception to its ruling: If an employee is terminated without cause, then the employee still may be entitled to a pro rata share of the compensation at issue. The court did not elaborate on what would constitute 'cause' in this context, whether the reason for the termination would make a difference, or whether an express provision in the incentive-compensation plan would eliminate the potential exposure. It therefore is unclear how far this exception may go." (Paul, Hastings, Janofsky & Walker LLP)
[Guidance Overview] Contractual Basis of Incentive Compensation Re-Emphasized: Restricted Stock in Lieu of Cash Wages Can Be Forfeited by Resignation in California
Excerpt: "In Schachter v. Citigroup, Inc., the California Supreme Court rejected claims that an incentive plan that conditioned the earning of restricted stock based on continued service was unlawful where the employee voluntarily elected to participate in the plan, and the employee quit before the date on which the incentive was earned. The plan was lawful even though the incentive plan was funded from wages that the employee would have otherwise received in cash. With this decision, the California Supreme Court joined the courts of six other states that had concluded the Citigroup Capital Accumulation Plan complied with each state's respective wage payment laws." (Littler Mendelson P.C.)
Performance-Based SERPs: An Alternative Approach to Executive Benefits
Excerpt: "Simply stated, a performance-based SERP places one or more performance conditions on an executive's accrual of benefits. SERPs are extremely flexible; there are many ways to design such a plan and various performance conditions that can be appropriate. Described [in the target document] are some plan design features that an employer may wish to consider for a performance-based SERP." (Hay Group)
Roundup of Recent 409A Developments for NQDC Plans
Excerpt: "Several 409A-related developments of interest to sponsors of nonqualified deferred compensation plans shed some light on current IRS views and compliance activities. The American Bar Association has posted a set of Q&As on 409A and other benefit issues, recapping informal Treasury and IRS guidance offered at meetings earlier this year. In addition, a recently released IRS chief counsel advisory raises 409A concerns about salary advances that offset deferred compensation. Finally, a number of companies have received 409A questionnaires from IRS auditors that focus on certain compliance areas." (Mercer LLC)
California Legislature Tries to Block Steep Cut in Its Pay and Perks
Excerpt: "The attorney general is asked to determine whether an 18% pay reduction and car allowance cuts are illegal. Capitol managers say a citizens panel that decided the reductions exceeded its authority." (Los Angeles Times)
To Retain Its Bankers, Citigroup Offers Stock Option Plan
Excerpt: "Hoping to encourage bankers and managers to stay, Citigroup began dispensing several million stock options this week to more than a quarter of its workers in a way that could result in a sizable gain for them. . . . As an extra incentive to stay and help with the turnaround, Citigroup said it would grant one stock option at just above the current market price for each unvested share employees had accumulated. If the share price rebounds, as it has at Goldman Sachs and JPMorgan Chase, Citigroup employees could see a sharp increase in their 2009 compensation." (The New York Times; free registration required)
Will the SEC Apply New Executive Compensation Disclosure Rules for 2010 Proxy Season?
Excerpt: "[On November 5, 2009], John White (former Director of the SEC's Division of Corporation Finance, now with a small NY law firm known as Cravath) and Paula Dubberly (currently Associate Director) each commented that: 'you probably ought to begin drafting your officers and directors questionnaire based on the new rules.' It doesn't sound promising." (Executive Compensation Blog by Michael Melbinger of Winston & Strawn)
[Guidance Overview] Towers Perrin Monthly Regulatory Round-Up: Executive Compensation (PDF)
Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during the past month that may be relevant to large employers." (Towers Perrin)
[Guidance Overview] Federal Reserve Board Enters Executive Pay Debate with Proposal for Oversight of Incentive Compensation
Excerpt: "The proposal does not create specific compensation guidelines or impose specific limits on executive pay. Rather, the Fed has advanced a series of principles for supervisory review of incentive pay programs. Under the proposal, incentive compensation arrangements must (i) provide incentives that do not encourage excessive risk-taking beyond the organization's ability to effectively identify and manage the risk, (ii) be compatible with effective controls and risk management and (iii) be support by strong corporate governance, including active and effective board oversight." (Kilpatrick Stockton)
[Guidance Overview] IRS Begins Section 409A Audits
Excerpt: "This news may come as an unwelcome surprise to many who were hoping that the complexities and uncertainties of Section 409A might delay the IRS's enforcement efforts until more guidance was available and practices further developed. Information Document Requests ('IDRs') from the IRS to companies undergoing audits reveal that the IRS requires an audited company to disclose details of pay practices that could be subject to Section 409A and also to consider the possible application of Section 409A to these practices." (Jones Day)
[Guidance Overview] California Supreme Court Affirms Employer's Right to Offer Voluntary Equity Plan
Excerpt: "In a decision strengthening the right of employers and employees to negotiate the terms of employees' compensation, the California Supreme Court in Schachter v. Citigroup, Inc. . . . . affirmed summary judgment against an employee who claimed that his incentive compensation plan violated the California Labor Code." (Morgan Lewis)
Towers Perrin U.S. Legislative Tracking Chart: Retirement and Executive Compensation (PDF)
Excerpt: "Thousands of bills are introduced in Congress but only a select few are summarized on this chart. This selection represents our best judgment on the likelihood of enactment and the relevance of the issue for employers." (Towers Perrin)
[Guidance Overview] Section 409A Errors That Can Still Be Corrected by December 31, 2009
Excerpt: "Although December 31, 2008, was the official deadline for bringing all deferred compensation plans and agreements into compliance with the new IRS regulations under Code ?409A, there are still several steps an employer can take by the end of 2009 to correct, or at least mitigate the effect, of failures to comply with ?409A." (Seyfarth Shaw)
Executive Pensions Reportedly Soar as Companies' Value Plummets
Excerpt: "Massive executive-pension growth was driven in part by generous pension formulas and little-scrutinized arcane techniques, the Wall Street Journal reported Tuesday." (Fox News)
[Guidance Overview] Deadline Approaches to Bring Qualified Performance-Based Compensation into Compliance with Section 162(m)
Excerpt: "In 2008, the Internal Revenue Service . . . issued Revenue Ruling 2008-13, which held that compensation arrangements that permit payment of performance-based compensation upon termination of the covered employee's employment (regardless of whether the performance goals are achieved) will not constitute qualified performance-based compensation, which is exempt from the $1 million per year deduction limit under Section 162(m) of the Internal Revenue Code . . . . Compensation arrangements covered by this Revenue Ruling generally should be amended by December 31, 2009 to avoid this adverse treatment." (Troutman Sanders)
[Guidance Overview] The Perfect Storm Swirling Around Executive Compensation and the Related Corporate Governance
Excerpt: "In addition to [SEC and IRS] regulation, the Financial Accounting Standard Board issued Statement 123(R) in 2006 requiring companies to estimate the amortized expenses of stock options on their income statements and has continued to regulate the disclosure of post-retirement medical and other benefit obligations under FASB Statement 158. All these measures are ways in which executive compensation has been subject to increasing regulation and disclosure requirements." (Haynes and Boone)
[Guidance Overview] Perform Year-End Review of Nonqualified Deferred Compensation Plans for 409A Operational Failures
Excerpt: "Employers that maintain nonqualified deferred compensation plans should strongly consider adding a review of operations for Section 409A non-compliance to their end-of-the-year to-do lists. If operational failures are identified and corrected before the year has run out, it may be possible to avoid some or all of the adverse consequences that would otherwise result under 409A by taking advantage of the relief provided under IRS Notice 2008-113." (Faegre & Benson)
[Guidance Overview] Last Chance to Fix Bonus Plans and Severance/Employment Agreements
Excerpt: "For those companies who have not yet revised their bonus plans or severance/employment agreements to comply with the IRS interpretation of Internal Revenue Code (Code) section 162(m) in Rev. Rul. 2008-13, 2008-10 IRB 518, now would be the time to do that in order to avoid a deduction disallowance for the 2010 annual bonus (and for long-term bonuses with a performance period beginning January 1, 2010)." (Miller & Chevalier)
[Guidance Overview] Federal Reserve Proposes Supervisory Initiatives Over Compensation Practices at Banks (PDF)
5 pages. (Buck Consultants)
More 409A Relief Coming?
Excerpt: "A hot new rumor in the world of executive compensation professionals is that the IRS will be announcing a 'one last chance to fix your documents for 409A' program in the very near future (okay, so we tend to get excited by little things). IRS Senior Counsel Stephen Tackney made the announcement at an ABA meeting. Apparently the document correction program would function like the operation failure correction program in IRS Notice 2008-113. That is, plan sponsors would have to self-correct the errors and bear any costs associated with the correction. However, Mr. Tackney also suggested the plan sponsors must attach information about their corrections to their tax returns for the year and affected participants must attach the same information to their personal returns." (Michael Melbinger via Winston & Strawn LLP)
[Guidance Overview] Federal Reserve Proposed Supervisory Initiatives Over Compensation Practices at Banks (PDF)
5 pages. Excerpt: "Comments Requested: The FRB is seeking comments on whether the proposed guidance would impose undue burdens on, or have unintended consequences for, banking organizations and, particularly, regional and small organizations. It has been estimated that the proposed guidance, if adopted in final form, would apply to 3,002 small banking organizations (defined as banking organizations with $175 million or less in total assets). Comments are requested by November 27, 2009. Conclusion: In light of the FRB's proposed guidelines, all banking organizations, large and small, should start to take immediate steps to evaluate their incentive compensation arrangements and related risk management, control, and corporate governance processes and immediately address deficiencies." (Buck Consultants)
Details on the Pay Czar's Cutbacks on Executive Pay
Excerpt: "[O]ne aspect of the Special Master's process troubled me. By his own account, the Special Master did not consult one person in the private sector (i.e., those of us actually working with executive compensation issues on a daily basis in the real world, as opposed to pondering them in the abstract). The professors with whom he consulted are brilliant people no doubt, but I wonder whether any of them have actually attended a Compensation Committee meeting or negotiated an employment agreement?" (Michael Melbinger via Winston & Strawn LLP)
[Opinion] Crackdown on Executive Pay: Too Much or Not Enough?
Excerpt: "Last week, the Obama administration's 'pay czar,' Kenneth Feinberg, announced that the government will impose caps on compensation for the 25 highest-paid executives at seven companies that received 'exceptional assistance' through the Troubled Asset Relief Program -- including American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC. Under the new regulations, salaries will be reduced by an average of 90%, and total compensation (including bonuses and stock options) will be lowered by 50%. Knowledge@Wharton spoke with Wharton accounting professor Wayne R. Guay and then with finance professor Alex Edmans about what these changes could mean for Wall Street, company shareholders and taxpayers. The [target page] is an edited transcript of the interviews." (Wharton School of the University of Pennsylvania)
Pay Czar Cuts Total Compensation, Increases Base Pay for Some Executives
Excerpt: "While Treasury Department pay czar Kenneth Feinberg cut by half total executive compensation at seven firms that received bailout packages, he substantially increased regular salaries or base pay, according to the Wall Street Journal. An analysis of government data by the Journal shows that on average, base salaries climbed to $437,896 a year as a result of Feinberg's review, compared with $383,409 previously - a 14% increase. Of the 136 employees under Feinberg's review, 89 saw their base salaries increase." (PLANSPONSOR.com; free registration required)
Last Chance for Some Companies to Amend Incentives to Secure 162(m) Deductions
Excerpt: "Employers that want to deduct incentives granted to executives in 2010 without hitting Section 162(m)'s $1 million cap on deductible pay should act now to review these arrangements. Incentive plans that guarantee payment on termination for good cause, involuntary termination or retirement may not qualify as performance-based compensation exempt from the 162(m) limit. IRS transition relief for many arrangements expires at the end of 2009." (Mercer LLC)
IRS Personnel Share Unofficial Comments on Compliance Issues with ABA Employee Benefits Committee
Excerpt: "IRS representatives shared their unofficial views on certain benefits issues that were presented earlier this year by the Employee Benefits Committee of the Tax Section of the American Bar Association. Although the views cited by the IRS representatives are not binding and do not represent the policy of the agency, they provide useful insight into areas of concern. Some of the notable unofficial and non-binding views shared by the IRS representatives were the following . . . ." (Deloitte via BenefitsLink.com)
What Sponsors and Advisors Should Know About Retirement Plans
Excerpt: "According to a 2007 U.S. Labor Dept. survey, 68% of small business owners feel unprepared for retirement and just 42% maintain a retirement plan. Here are four frequently overlooked tips about retirement plans for plan sponsors and their advisors." (BusinessWeek)
TARP Special Master Cuts Executive Pay
Excerpt: "Steep pay cuts will have to take place at the seven companies receiving exceptional TARP assistance -- AIG, Citigroup, Bank of America, Chrysler, General Motors, GMAC and Chrysler Financial -- Kenneth Feinberg, special master for TARP executive compensation, has ruled. While the pay curbs affect a limited number of employees and employers, the underlying compensation principles may draw wider attention from other regulators and stakeholders." (Mercer LLC)
Prevalence and Design of Executive and Director Stock Ownership Guidelines Among the Top 250 Companies (PDF)
21 pages. Excerpt: "The past year may prove to be another important year in the evolution of stock ownership guidelines and their prevalence among the Top 250 companies. The dramatic market decline has once again refocused investor attention on reinforcing alignment of interests between executives and directors and long-term shareholders. In addition, the fall in stock prices has affected executives' and directors' abilities to comply with stock ownership guidelines, encouraging companies to reexamine their policies. As presented in this report, the Top 250 companies commonly employ value-based ownership guidelines under which the number of shares required to be owned fluctuates based on changes in stock prices." (Frederic W. Cook & Co., Inc.)
Curbing Excessive Executive Compensation by Making It Non-Deductible
Excerpt: "Aaron Zelinsky . . . proposes curbing excessive executive compensation by making it nondeductible. The best part: the IRS can do it by simply re-interpreting an existing provision of the tax code, so there's no need for a bruising political battle in Congress." (Workplace Prof Blog)
Some Retiring CEOs Take Good Stock Prices with Them, Study Says
Excerpt: "A new study indicates that companies that use Supplemental Executive Retirement Plans (SERPs) could see their shares suffer when the CEO departs. The study found that for Fortune 1000 companies in the 1997-2006 period, stock prices lagged those of peers by 8.3% over three years following the retirements of CEOs whose SERPs were based on their performance in their last years, Reuters reports. Professor Paul Kalyta of McGill University in Montreal, author of the study, said the CEO 'has strong incentives to make accounting choices that increase firm short-term income and, therefore, amplify the value of his/her pension,' leaving the shares of companies with big CEO SERPs 'temporarily overpriced.'" (PLANSPONSOR.com; free registration required)
Bailed-Out Firms Ordered to Slash Top Pay
Excerpt: "The Treasury Department today ordered seven companies that received billions of dollars in government bailouts to halve total compensation for their top executives. But the big reductions will not apply to pay earned before November. Kenneth Feinberg, the Treasury official leading the pay review, told reporters that average salaries for the top 25 executives are being cut 90 percent starting next month. The action will apply to the top executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial." (DelawareOnline)
Government to Order Pay Cuts at AIG, Other Firms
Excerpt: "The Obama administration reportedly will order American International Group Inc. and other bailed-out companies to slash the compensation of their highest-paid executives. The New York Times and the Wall Street Journal, citing people familiar with the administration's plans, reported Wednesday that the move stems from the growing furor over executive pay at companies that have received federal bailouts." (Business Insurance)
IRS Mounts Audit Initiative Targeting Misclassification and Fringe Benefits
Excerpt: "In the next few months, the IRS will commence an audit initiative intended to study compliance in the areas of payroll taxes, independent contractor (IC) status and fringe benefits/executive compensation arrangements. One of the goals is to reduce: (1) the tax gap by increasing tax compliance' and (2) the number of 'misclassified' ICs. A likely secondary objective, and one urged by the Government Accountability Office (GAO), is to ensure benefits coverage and 'labor protection' associated with employee status." (Thompson Publishing Group, Inc.)
Executive Compensation: Facts
Excerpt: "In this paper we describe the important features of executive compensation in the US from 1993 to 2006. Some confirm what has been found for earlier periods and some are novel. Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
At Rescued Banks, Chief Executive Perks Keep Rolling with Fringe Compensation Rising 4 Percent Last Year
Excerpt: "Even as the nation's biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives. The firms, accounting for more $350 billion in federal bailout funds, increased these perks and benefits 4 percent on average last year, according to an analysis of corporate disclosures filed in recent months." (The Washington Post; free registration required)
[Guidance Overview] Many Companies Need to Amend for 162(m) by Year End (PDF)
2 pages. Excerpt: "Many companies will need to amend their employment agreements, equity plans and awards, and other incentive plans and agreements by December 31, 2009, to preserve the deductibility ofperformance-based awards and amounts under Code Section 162(m) [the $1 million limit on public companies' ability to deduct compensation payments to their named executive officers] in light of Rev. Rul. 2008-13. . . . Companies generally do not need to review or revise arrangementswith employees who are not subject to Code Sec. 162(m) ? and are highly unlike ever to become subject to Code Sec. 162(m). However, a company should cast its net broadly, because Code Sec. 162(m) applies in the year the award or other compensation becomes taxable ? and deductible by the corporation ? which may be several years in the future, after certain employees have been promoted." (Winston & Strawn LLP)
[Guidance Overview] Public Companies Face Deadline to Amend Incentive Pay and Preserve Tax Deductions
Excerpt: "Many public companies . . . will have to comply with the Revenue Ruling for incentive plans and arrangements having a 2010 performance period. Public companies should review their executive employment agreements and compensation plans and arrangements to determine whether any modifications are needed to ensure the deductibility of incentive pay. For calendar year plans, action by the board of directors or the appropriate committee may be necessary before January 1, 2010." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Executive Compensation Tax Rules May Require Year-End Planning
Excerpt: "As 2009 winds down, companies should consider a number of executive compensation tax rules that are sensitive to year-end deadlines. This Commentary discusses (i) planning opportunities under Code Section 409A to address potential tax rate increases on deferred compensation, (ii) how typical severance benefits, including bonus termination payments, may cause problems under the Code Section 162(m) $1 million deduction cap (the '$1 Million Cap'), and (iii) the need to consider the IRS' corrections program for Code Section 409A operational failures." (Jones Day)
2009 Director Compensation: NASDAQ 100 vs . NYSE 100 (PDF)
27 pages. Excerpt: "For the first time in the seven years that Frederic W. Cook & Co. has conducted its annual study of outside director compensation,median compensation for directors at the 100 largest NYSE companies exceeded that provided by the 100 largest NASDAQ companies. New to this year's report is an analysis on the prevalence of mandatory retirement policies for outside directors." (Frederic W. Cook & Co., Inc.)
[Guidance Overview] Montana Supreme Court Upholds Award in Executive Pension Plan Case
Excerpt: "The Montana Supreme Court has upheld a $21.4 million award in a case filed by 15 retired Montana Power Co. executives whose supplemental retirement benefits were cut off in 2005 without notice. With a purchase agreement between NorthWestern Corp. of South Dakota and Montana Power Co. in 2002, NorthWestern Corp. assumed responsibility for the supplemental pensions offered to some Montana Power employees for taking early retirement. . . . However, after NorthWestern emerged from bankruptcy reorganization in late 2004, its board of directors decided to stop paying the supplemental pensions, without telling retirees." (PLANSPONSOR.com; free registration required)
Physical Exams for Executives: Effective? Inequitable?
Excerpt: "The theory is the extensive series of medical tests and exams are more likely to expose health risks, perhaps even life-threatening ones. Identifying these concerns early helps ensure executives aren't sidelined, thus minimizing chances for leadership disruptions and productivity losses. Considering this bundle of benefits, who would oppose executive physicals?" (Human Resource Executive Online)
[Guidance Overview] Many Companies Need to Amend for 162(m) by Year End
Excerpt: "Many companies will need to amend their employment agreements, equity plans and awards, and other incentive plans and agreements by December 31, 2009, to preserve the deductibility of performance-based awards and amounts under Code Section 162(m) [the $1 million limit on public companies ability to deduct compensation payments to its named executive officers] in light of Rev. Rul. 2008-13." (Winston & Strawn)
IRS Begins 409A Audits!
Excerpt: "Frighteningly, the IRS is already conducting audits of companies' compliance with the complex requirements of Code Section 409A. [A redacted copy of an Information Document Request from the IRS] asks more than 15 separate questions on 409A compliance, including . . . ." (Michael Melbinger via Winston & Strawn LLP)
[Guidance Overview] Year-End Deadline for Bonus and Performance-Based Equity Fast Approaching
Excerpt: "An important deadline for amending executive bonus and other performance-based compensation arrangements is approaching quickly. Public companies should review performance-based arrangements (e.g., bonus plans and equity awards) now to ensure compliance with changes announced by the Internal Revenue Service (IRS) under section 162(m) of the Code. Generally, any necessary amendments to address these changes should be made by December 31, 2009." (Groom Law Group)
Executive Pay Reform: Beyond the Corporate and Financial Institution Compensation Fairness Act of 2009
Excerpt: "Compensation committees serving public companies are facing unprecedented scrutiny as they react to recent executive pay reform efforts led by federal lawmakers and agencies, institutional shareholders and corporate governance watchdogs. Most recently, leaders of the G-20 endorsed reforms that, among other things, would curb bonuses at financial firms and grant regulators greater power over those firms' compensation practices. In this Q&A, Pillsbury Executive Compensation & Benefits partner Scott Landau explores the issues Compensation Committees of public companies must consider under the rapidly evolving landscape of compensation design and implementation." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Towers Perrin Monthly Regulatory Round-Up on Executive Compensation, September 2009 (PDF)
3 pages. Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during July 2009 that may be relevant to large employers. Developments are sorted according to federal legislative developments, federal regulatory guidance, other developments (e.g., significant litigation, studies, select state law developments)." (Towers Perrin)
[Guidance Overview] What is the Top-Paid Group Election?
Excerpt: "Even when using the 'top-paid group election' to determine highly compensated employees, the 5% owners rule must be considered since 5% owners may not be in the top 20% group. How can these rules be reconciled?" (McKay Hochman Co., Inc.)
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