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Executive benefits

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Tax Reform: Side-by-Side Comparison of Employee Benefit Provisions of House and Senate Bills
"The House initially took a heavy hand to many favorable executive compensation provisions and made some important changes in the retirement and welfare areas, but the House Ways and Means Committee relented a bit. The Senate Finance Committee proposal, as modified ... followed suit in its approach to executive compensation." (Seyfarth Shaw LLP)
Implications for Employers Who Delay Deferred Compensation FICA Taxation
"If an employer discovers an omission of FICA withholding on an employees deferred compensation after the statute of limitations has passed, the employer must follow the general timing rule and the deferred compensation will be subject to FICA tax when paid. Due to this error on the part of the employer, the employer and employee could be subject to higher FICA taxes, since they were unable to take advantage of the special timing rule." (WithumSmith+Brown, PC)
Tax Reform Legislation Moves Through the House and Senate (PDF)
"[Both bills] contain several provisions that would change the tax rules with respect to retirement plans, executive and nonqualified deferred compensation (NQDC') arrangements, employee fringe benefits, and health and welfare plans. [Includes a link to a] side-by-side summary comparing the retirement, executive compensation, fringe benefit, and health and welfare provisions in the House and Senate bills[.]" (Groom Law Group)
No More Procrastination: The Pay Ratio Has Arrived
"While public companies with high ratios may encounter negative press, it is not clear how investors will react to the ratios disclosed, at least during this first year of disclosure. Institutional Shareholder Services (ISS) ... found that 63% of investor respondents indicated that they did intend use the pay ratio to make comparisons between companies and to make comparisons between ratios for the same company year after year." (Mayer Brown)
Section 162(m) FAQs Under the House and Senate Tax Bills
"What big changes are in store for Section 162(m) in the current tax bills? ... What performance-based awards are affected? ... When would the changes kick in? ... How would the changes affect old awards and deferrals that result in compensation in future years? ... Should a company accelerate payouts of 2017 annual incentive, to pay before year end?" (Steven Hall & Partners)
Proposed Tax Reform Bills of Senate and House Now Aligned on Key Compensation and Benefits-Related Tax Provisions
"[B]oth the House and Senate proposals leave the current law regarding the taxation of stock options and restricted stock units (RSUs) largely intact, stepping away from the initial proposals to tax such awards at vesting.... The proposed amendments would eliminate a publicly traded company's ability to deduct compensation above $1 million that it pays in any year to any covered employees... [W]ith the proposed 20 percent corporate tax rate, the lost tax deduction will be smaller than under current law." (Wilson Sonsini Goodrich & Rosati)
Tax Reform: The Shifting Landscape of Executive and Equity Compensation
"The House passed its [version of the] bill on November 16, 2017.... [On] November 15, 2017, the Senate Finance Committee released its current proposal which ... eliminated certain wide-sweeping amendments included in the initial Senate tax reform proposal.... [A table] summarizes key executive and equity compensation provisions of the House Bill and the Senate Proposal." (Pillsbury Winthrop Shaw Pittman LLP)
Latest Senate Markup of the Tax Bill Strikes NQDC Provisions but Retains Revisions to 162(m) Limits on Executive Pay
"Adoption of Code section 409B would have literally been the end of elective nonqualified deferred compensation plans.... It appears support for overhauling the rules relating to nonqualified deferred compensation is losing steam.... At the same time, the latest markup of the Act by the Senate did not remove the provisions changing Code section 162(m)." (Trucker Huss)
Senate Tax Bill Revisions Kill ACA Individual Mandate, Preserve Current Retirement and NQDC Contributions
"Unlike the House version, the Senate bill, as amended, would effectively repeal the [ACA's] individual mandate ... Like the House tax bill, the Senate version now keeps pretax retirement contributions to 401(k) and similar plans intact.... Senate Republicans added an employer credit for paid family and medical leave to the bill.... [By] Nov. 15 the NQDC provision was gone from the revised mark-up of the bill." (Society for Human Resource Management [SHRM])
2017 End of Year Plan Sponsor 'To Do' List, Part 3: Executive Comp
"Last chance to correct certain Section 409A document failures discovered in 2017 ... Nonqualified deferred compensation deferral elections should be made on or before December 31, 2017 ... Consider shareholder reapproval of Section 162(m) performance compensation plans approved in 2013 ... Review whether your equity-based compensation plan has sufficient shares remaining for 2018 awards ... Consider adding separate annual limits on director equity awards ... Section 6039 information statements due by January 31, 2018 ... Consider revising stock-based incentive programs in response to FASB's new approach to share-based withholding." (Snell & Wilmer)
Should You Make Your Annual Incentive Bonuses Deductible in 2017?
"A potential sticking point for many companies is that they require their employees to be employed on the day bonuses are paid, usually in March 2018. Ordinarily, that requirement would cause the bonus program to fail the 'all events test' under Code Section 461 and, consequently, prevent deduction in 2017. However, there are other methods of satisfying the 'all events test' to allow a company to deduct in 2017, employee bonuses paid in 2018." (Winston & Strawn LLP)
Description of the Chairman's Modification to the Chairman's Mark of the Tax Cuts and Jobs Act
103 pages. "Scheduled for markup before the Senate Committee on Finance on November 15, 2017 ... The Chairman's modification strikes the following proposals: [1] Item III.H.1, Nonqualified deferred compensation, [2] Item III.K, Determination of worker classification and information reporting requirements, [3] Item III.M.2, Application of 10-percent early withdrawal tax to governmental section 457(b) plans, and [4] Item III.M.3, Elimination of catch-up contributions for high-wage employees." [Also available: Estimated revenue effects of these modifications.] (Joint Committee on Taxation [JCT], U.S. Congress)
[Opinion] Tax Reform Would Put Your Retirement at Risk, Change Rules for Deferred Comp
"Although the House Ways and Means Committee announced ... it has removed from its version of the bill Section 3801, which would have dismantled and destroyed nonqualified deferred compensation, the Senate has yet to follow suit. As the proposed changes currently stand, the Senate's Tax Reform bill will increase taxes on employee savings, radically change compensation policies and reduce the capability of U.S. employers to compete for talented workers....Changing 409A will change how people save, how executives are paid, and how businesses compensate workers, not just executives." (Fulcrum Partners, LLC)
Executive Comp Enters Uncertain Territory with Tax Overhaul and Other Changes Pending
"In addition to pending tax changes that could reshape the executive comp landscape, the GOP's deregulatory agenda has placed various Dodd-Frank Act requirements on the chopping block.... Legislation isn't the only avenue available for taking down unwanted Dodd-Frank requirements, however, as evidenced by recent regulatory shifts coming out of the [SEC]." (Bloomberg BNA)
Analysis of Executive Change in Control Arrangements of the Top 200 Companies (PDF)
24 pages. "[T]his study analyzes the benefits received by the CEOs and other named executive officers ('Other NEOs') at the 20 largest public companies in 10 different industries, based on market capitalization.... The prevalence of a three times or higher severance multiple for CEOs has fallen from 37% in 2015 to 33% in 2017 ... 67.5% of the average 2017 total [change in control] amounts for CEOs and Other NEOs is made up of equity awards. This is down slightly from 70.4% in 2015.... 90% Percent of companies that currently provide an excise tax gross-up or modified gross-up payment have indicated that they intend to phase out or completely eliminate excise tax gross-up provisions in the future." (Alvarez & Marsal)
House and Senate Have Their Sights on Deferred Compensation in Proposed Tax Bills
"The key changes that the Ways and Means Committee made to the bill include ... [1] Code Section 409B was withdrawn from the bill, meaning that Code Sections 409A and 457(b), and all other current guidance for nonqualified plans, should remain in place.... [2] New Code Section 83(i) was added, which would allow certain privately held company employees to defer recognition of income related to stock options." (Porter Wright Morris & Arthur LLP)
A Look at the House Ways and Means Committee Revisions and the Senate Mark of Tax Cuts and Jobs Act (PDF)
"The Senate Mark also introduced a five percent Federal income tax withholding obligation on compensation paid to independent contractors and included other differences to the final House bill impacting [1] compensation-related deductions, [2] employer-provided fringe benefits, [and] [3] retirement plans ... [T]he House bill and Senate Mark are aligned on changes to section 162(m), including the proposed elimination of the performance-based compensation exception to the $1 million limit on the deductibility of covered employee compensation" (Baker McKenzie)
Executive Comp Programs Still on the Chopping Block in Senate Version of Tax Reform (PDF)
"[The proposed Code section 409B would exclude] from the definition of non-qualified deferred compensation death, disability, sick leave, compensatory time and vacation leave programs. Unfortunately, the Senate proposal specifically prohibits the IRS from creating an exception from these rules for any type of severance pay plan, which means employers would no longer be able to provide for multiyear severance pay or benefits.... However, the Senate proposal states that it would not apply to section 83 property or amounts contributed to a Code section 402(b) nonqualified employee trust." (Trucker Huss)
From Fourth Circuit: Top-Hat Plan Can Change Crediting Rate Used to Calculate a Participant's Payout
"After plaintiffs retired, the Plan's board amended the crediting rate again which resulted in a more flexible crediting rate linked to a participant's selection of one (or more) of four valuation funds ... But this arrangement included more volatility and risk, including the possibility of losing value in a participant's notational account. Because of the lack of predictability, the annual payments could no longer be made strictly equal.... The district court denied plaintiffs' motion for class certification ... granted summary judgment to the company, and held that the Amendment was valid." [Plotnick v. Computer Sciences Corp. Deferred Comp. Plan for Key Executives, No. 16-1606 (4th Cir. Nov. 8, 2017)] (Roberts Bartolic)
GOP Tax Proposal Eviscerates Current Executive Compensation Designs and Practices -- Perhaps? (PDF)
10 pages. "[C]ompanies should review their compensation -- both outstanding and to be granted -- and consider whether any changes are advisable to lessen the impact of the Tax Proposal changes. [A chart] lays out the key issues most likely to be faced by the majority of public companies if the NQDC rules are enacted, but there will be specific facts and circumstances that could warrant other potential action that companies may need to consider as well." (ExeQuity)
[Opinion] An Obituary for Equity Compensation, d. 2017
"Stock Options, Restricted Stock Units, young Performance Units and their cousin Non-Qualified Deferred compensation tragically died in 2017 as an unintended consequence of colliding with the 429 page U.S. tax reform ... Employee Stock Purchase Plan is currently in critical condition at a local hospital.... The proposed tax reform bill of 2017 would eliminate many of the time-tested and successful components of equity compensation, effectively removing one of the three legs of many companies' three-legged stool of compensation philosophy." (Performensation)
Differences in Amended House Bill, Senate Proposal, Place Future of Executive Compensation Changes in Limbo
"While the House decided to remove the proposed changes to the [NQDC] rules and leave in place the repeal of the 162(m) performance-based compensation exception, the Senate version kept intact the NQDC proposed changes and expanded the changes to 162(m). To meet Congress's aggressive timetable for tax reform passage, if there are differences in the bills, it is speculated that the House would then move to adopt the Senate version of the bill, in its entirety, rather than have a conference committee to resolve those differences. Thus, all eyes are on the Senate version to see if the executive compensation provisions are amended during the markup[.]" (Willis Towers Watson)
House-Proposed Tax Cuts and Jobs Act Would Send Executive Comp Back to the Stone Age
"If adopted, these provisions would significantly limit U.S. businesses in their flexibility to design competitive compensation programs tied to their specific business needs. It will push companies towards annual-only performance periods, time-vesting conditions for longer periods, and less use of equity compensation ... As proposed, Section 409B would effectively end -- or require dramatic redesign of -- many common compensation arrangements used today:" (K&L Gates)
Tax Reform Proposal Would Impact Savings Arrangements
"The Ways and Means Committee continues to make changes to the bill before the House of Representatives votes on it. The vote was expected to occur during the week of November 13, 2017, but may occur earlier. Meanwhile, the Senate is working on a tax reform bill of its own. Although the legislative process is still ongoing, [this article provides] a summary of the more significant provisions from the initial proposal that could become law and affect tax-favored savings arrangements." (Ascensus)
New Tax Reform Bill: Major Changes to Executive Compensation Lead Impact on Benefits and Compensation Practices (PDF)
9 pages. "Employers that have used nonqualified deferred compensation plans to attract and retain highly compensated employees ... would need to consider alternatives to achieve their goals ... With the possible exception of incentive stock options, there would appear to be no reason for employers to grant stock options or stock appreciation rights.... [R]ule changes would ease the ability of employees to take hardship withdrawals and would reduce some of the complexity in administering hardship withdrawals.... As a taxable contribution, [Dependent Care FSAs] would be effectively eliminated as they would have no value to employees.... The Tax Bill does not eliminate Health Care Flexible Spending Accounts." (Mazursky Constantine LLC)
House Bill Could Prompt the Most Significant Changes in Pay Plan Design in a Generation
"The proposal would do away with the performance-based compensation exception to the $1 million pay cap under current Code Section 162(m).... Without the need to meet the performance-based pay exception, companies would no longer need to get shareholder approval of their plans for 162(m) purposes, nor would compensation committees need to set performance goals within the first 90 days of the performance period. They also would no longer be limited to using negative discretion only in making their bonus and LTI payout determinations." (Willis Towers Watson)
Proposed Tax Bill Would Make Big Changes to (and Create New Opportunities for) Executive Compensation
"[T]ax-exempt and governmental employers have been dealing with these rules for decades, and these employers still manage to provide deferred compensation to their executives. In some ways, tax-exempt employers have less flexibility to design these types of plans than for-profit employers, but in other ways, tax-exempt employers think quite clearly and strategically about the mix of incentive-based pay and supplemental retirement benefits. Second, the Proposed Act will not be the final word on these types of arrangements. Even if the Proposed Act's terms remain in a final bill that becomes enacted (a big 'if'), the Proposed Act directs the Treasury Department to issue regulations that define certain terms and carve out exceptions." (Porter Wright Morris & Arthur LLP)
Proposed Tax Bill Changes Are Worse Than We First Reported
"The Bill would essentially end the deferral of compensation, supplemental executive retirement plans, and excess plans, as we know them by replacing Code Sections 409A and 457A with a new Code Section 409B, effective for services performed after December 31, 2017.... The Transition rules provide that all deferred compensation amounts and accrued benefits as of December 31, 2017 will be grandfathered under the rules of 409A until 2025. In 2025, those amounts when the will recognized as income, unless they remain subject to a substantial risk of forfeiture.... Supposedly another version of the Tax Bill is expected this week, so everything in here may be superseded." (Winston & Strawn LLP)
Companies Can Safeguard Pay Data, with Limits, SEC Staff Says
"[SEC staff] responded to an inquiry about investor disclosures under 1933 Securities Act Rule 701(e). The regulation allows companies to use unregistered securities as part of a compensatory benefit plan. The plan must be delivered to investors, electronically or otherwise. The staff said it understands that companies using electronic delivery are concerned about the possible disclosure of sensitive corporation information, and that standard safeguards, such as log-in requirements, are permissible. However, the safeguards can't be unduly burdensome, according to the staff." (Bloomberg BNA)
House Draft of Tax Reform Bill Contains Opportunities and Surprises for Stock Compensation
"Among those who receive grants of incentive stock options (ISOs), much rejoicing would occur if the AMT were repealed. Companies might then use incentive stock options more frequently.... Stock options and stock appreciation rights could get caught up in the definition of NQDC, at least in the House draft legislation. If so, that could lead to taxation at vesting! However, considering the way in which stock options and SARs were initially penalized in the early versions of the Section 409A regulations, we would expect that if this provision continues it will be amended to apply only to discounted grants." (
Employee Benefit Provisions in the Proposed House Tax Bill
"The [proposed] rules raise many issues. For example, how do you tax nonqualified deferred compensation that has vested, but whose value is wholly contingent on future events? Will there be a reconciliation of the taxes that are paid when deferred compensation vests with the amount (including earnings) that is eventually paid? Special complications apply to existing awards granted before 2018 but that will not vest until after 2017." (Nixon Peabody LLP)
Tax Cuts and Jobs Act: Good News for 401(k) Plans, Bad News for Nonqualified Deferred Compensation
"While there were no adjustments to contributions to 401(k) plans under the Act, that does not mean that the final version of the bill will not include some form of Rothification.... The Act liberalizes certain rules relating to hardship distributions.... This proposal would eliminate many standard forms of deferred compensation, such as 401(k) mirror plans. It also removes from the Code, with respect to services performed after December 31, 2017, Sections 409A, 457(b) (for tax exempt employers), 457(f), and 457A ... The exclusions for adoption assistance, dependent care, qualified moving expenses, and employee achievement awards are repealed." (The Wagner Law Group)
U.S. Tax Reform: Death to Nonqualified Deferred Compensation?
"An employee will no longer be permitted to electively defer compensation out of salary or bonus.... [T]axes may be incurred on account of accruals of benefits under an nonqualified 'excess plan' that wraps around a tax-qualified plan. In addition, the new law would extend to stock options and stock appreciation rights, and also would seem to apply to things like profits interests.... This approach to taxation of nonqualified deferred compensation is currently the rule for tax-exempt organizations under Code Section 457(f)." (Squire Patton Boggs)
House Tax Reform Bill Unveiled (PDF)
"In addition to proposing reductions in individual and corporate tax rates, the House Bill proposes far-reaching changes to the taxation of executive and nonqualified deferred compensation and relatively minor changes to IRA and qualified retirement plan rules, clarifies that unrelated business income tax (UBIT) applies to state and local government plans, and changes the tax rules that apply to various types of fringe benefits provided to employees. Notably, the House Bill does not contain changes to the tax incentives for retirement savings." (Groom Law Group)
Tax Reform Contemplates Changes to Employee Benefits
"Elimination of certain income tax exclusions ... Loosen[ed] restrictions on hardship distributions from 401(k) plans ... Reduction in minimum age for in-service distributions from 457(b) plans and [DB] plans ... Extended rollover period for plan loan offset amounts ... Modified nondiscrimination testing rules for frozen legacy plans ... Additional limitations on archer medical savings accounts (Archer MSAs)." (Proskauer's ERISA Practice Center)
Proposed Tax Law Would Doom Nonqualified Deferred Compensation as You Know It
"Amounts will be considered subject to a substantial risk of forfeiture only if the service provider's right to the compensation is contingent on the future performance of substantial services, which is far narrower than the Section 409A definition.... This broad language would appear to include stock options, stock appreciation rights, phantom equity and other equity-based compensation arrangements; however, the inclusion of incentive stock options as deferred compensation is not entirely clear ... Section 457 plans maintained by tax-exempt employers are not excluded from the Bill's definition of nonqualified deferred compensation and would also be subject to its requirements." (Paul Hastings LLP)
Tax Bill Would Change the Face of Executive Compensation
"The draft would amend Code Section 162(m) (the $1 million pay cap) to eliminate the exemption for performance-based compensation. In addition, that section would be amended to cover the Chief Financial Officer in addition to the Chief Executive Officer. Code Section 409A would be repealed (you thought that was good news, didn't you?) and replaced with a new Code Section 409B. Essentially, 409B as drafted would apply the much more stringent taxation upon vesting rules that have previously applied generally only to 457(f) plans." (Benefits and Compensation with John Lowell)
Passage of the Tax Cuts and Jobs Act Would Mean the End of Executive Comp as We Know It
"If enacted, the newly proposed Tax Cuts and Jobs Act would effectively put an end to many of the most widely used forms of executive compensation: Deferred compensation and stock options would disappear. Use of performance-based compensation would be severely limited. Compensation over $1 million to senior executive officers would be nondeductible for public companies and subject to an excise tax for tax-exempt organizations." (Skadden)
Proposed Tax Bill Has Little Impact on 401(k) Plans But Has Sweeping Changes to Nonqualified Deferred Comp
"[U]nder the new legislation, all nonqualified deferred compensation would become taxable when vested.... Deferred compensation relating to services performed before 2018 would continue to be subject to the current rules until 2025. At that time, even these grandfathered deferrals would become subject to the new tax-on-vesting rule." (Mazursky Constantine LLC)
[Opinion] How Will Employees React If Peer Group Comparisons Are in Your CEO Pay Ratio Proxy Disclosure?
"[A] recent ISS Position Paper [recommends] companies include in their disclosure a comparison to peer group disclosures.... [T]aking an approach that focuses solely on placing the pay ratio in context for shareholders is likely at odds with the message companies want to communicate to their employees, which they've expressed to be their biggest challenge regarding the pay ratio ... [BLS] data used in the ISS position paper greatly overstate employee pay levels, and should not be used to compare pay ratios published in company proxies." (Willis Towers Watson)
Holy Cow! Proposed Tax Bill Would Turn Executive Compensation on Its Head
"The bill would eliminate Code Section 409A effective next year and come up with a new 409B that essentially applies the 457 approach of taxable when vested." (Winston & Strawn LLP)
Nonqualified Deferred Compensation Planning Affected by 2018 Contribution Limits for Qualified Retirement Plans
"[T]he contribution limits of qualified plans form the major reason for the existence of nonqualified plans ... The changes in limits from 2017 to 2018 are slight. If you have already maxed out your qualified plan contributions for 2017, you will probably do the same in 2018, so you will need to rely on NQDC plans to defer any salary and bonus increases you expect in 2018." (
[Guidance Overview] A Question and Answer Guide to Internal Revenue Code Section 409A (PDF)
14 pages; 33 Q&As. "This guide provides, in question-and-answer format, a digest of the major features of Internal Revenue Code Section 409A that clients and nontax lawyers may need to know. (This guide has been updated as of October 2017 to reflect guidance issued to date.)" (Sullivan & Worcester)
Supplemental Benefit Planning for Tax-Exempt Employers (PDF)
"Tax-exempt employers face a matrix of tax and disclosure issues in designing an appropriate supplement retirement program. [This] article aims to be a resource to that design activity by examining the income tax, payroll tax, and Form 990 reporting aspects of the major plans currently available to tax-exempt employers and then examines those major plans from the reference point of several major design considerations." (McDermott Will & Emery, via Employee Benefit Plan Review)
[Guidance Overview] Trigger Question on the Rebuttable Presumption for Executive Compensation
"Form 990, Part VI, line 15 asks how an organization determines compensation for its various executives. These questions are based on the rules establishing the rebuttable presumption as outlined in [Treasury] Regulation Section 53.4958-6. If these rules are followed, a compensation arrangement is presumed to be at fair market value. The burden of proof that a compensation arrangement isn't at fair market value is then moved from the taxpayer to the IRS." (Schneider Downs)
Proxy Advisors and Investors Announce How They Will Use CEO Pay Ratios in 2018
"CEO pay ratios will not have any impact on ISS's analysis or vote recommendations in 2018. However, ISS will include the information in its reports.... Glass Lewis confirmed that it does not intend to incorporate the pay ratio into its assessment and analysis of Say on Pay proposals in 2018, but also will include pay ratios in its reports." (Meridian Compensation Partners, LLC)
Executive Comp Nuggets from the Annual NASPP Conference
"[1] Prepare for impact of accounting rules changes on financial performance measures.... [2] Don't overlook death and disability benefits in the payments upon termination of employment or change in control.... [3] Ensure that the summary of key provisions of your incentive plan in your proxy statement matches the plan language exactly.... [4] Consider automatic exercise of in-the-money stock options.... [5] Verify that all plans and agreements provide for clawback and the clawback policy will work.... [6] Verify that your tax withholding on equity awards is updated ... [7] Be sure your equity incentive plan has a meaningful limit on directors equity awards and total compensation.... [8] Consider whether your compensation risk assessment efforts have been thorough and red flags addressed." (Winston & Strawn LLP)
[Official Guidance] Text of Treasury Department Priority Guidance Plan, 2017-2018 (PDF)
28 pages. Starting on page 7 are 23 items relating to Retirement Benefits, followed by 17 items for Executive Compensation, Health Care and Other Benefits, and Employment Taxes. (Internal Revenue Service [IRS])
Executive Compensation in the Banking Industry
"A new wave of increased scrutiny on banking compensation practices has emerged, particularly sales incentive practices at lower levels of the organizations. This has spurned even greater focus on clawbacks and forfeitures of incentive pay when fraud, misconduct and bad risk behavior occurs. In fact, forfeiture policies are the fastest growing risk mitigating design feature we are seeing in response to this new crisis." (Meridian Compensation Partners, LLC)
[Opinion] Update on Clawback Policy Issues
"[Some practitioners] believe that executives will rebel at attempts to impose a too-strong clawback policy, and that it would not be fair to give the board too much power and discretion over compensation paid out or promised. Clearly, the process of crafting a policy that allows a compensation clawback or forfeiture under appropriate circumstances, while being fair to executives, requires careful deliberation and drafting." (Winston & Strawn LLP)
[Guidance Overview] Pay Ratio: The Time Has Come
"The latest guidance emphasizes the fact that many aspects of the rules are designed to provide flexibility in how issuers approach compliance with the pay ratio calculation and disclosure requirements and that there is the ability to use methods that are tailored to fit an issuer's facts and circumstances." (Fried, Frank, Harris, Shriver & Jacobson LLP, via Harvard Law School Forum on Corporate Governance and Financial Regulation)
[Guidance Overview] How the New CEO Pay Ratio Guidance Should Relieve Uncertainty, and Save You Time and Money
"Companies and their counsel, previously wary of using reasonable estimates and statistical sampling, should be comforted by an acknowledgment that the burden of proof in SEC enforcement actions is extremely high.... By not having to 'audit' the accuracy of pay data when they believe in good faith it is an accurate representation of their pay demographics, companies will reduce compliance costs and concern that their systems might not have precise and accurate pay data for all employees.... The guidance on statistical sampling and reasonable estimates may open the eyes of companies that have been reluctant to use these approaches before the guidance was issued." (Willis Towers Watson)
Treasury Report Recommends Repeal of Pay Ratio Rule
"A Treasury Department report providing recommendations on how to reform the regulation of U.S. capital markets urged Congress to repeal the Dodd-Frank pay ratio rule in discussing elimination of non-material disclosures ... The report also recommended that if Congress determined the disclosure was worthwhile, the regulatory responsibility for pay ratio be moved from the SEC to the Labor Department." (HR Policy Association)
Ohio Supreme Court: SERP Excluded from Municipal Income Tax
"After years of litigation, a former National City executive has prevailed in a hard fought tax dispute with the city of Cleveland.... The case provides that a Supplemental Executive Retirement Plan (SERP) must be excluded from the Cleveland municipal income tax as a 'pension' benefit. The ruling buttresses a 2014 Franklin County Court of Appeals decision that reached the same result in a dispute between the same taxpayer and the city of Shaker Heights. The cases could have implications for taxpayers with SERP income across the state." [MacDonald v. Cleveland Income Tax Bd. of Review, No. 2016-0778 (Ohio Sept. 26, 2017; unpub.) (McDonald Hopkins)
Employee Reaction Is U.S. Employers' Biggest Challenge with Pay Ratio Disclosure
"One half of U.S. companies say their biggest challenge in complying with the forthcoming pay ratio disclosure rule is forecasting how their employees will react ... The poll also found nearly half of respondents haven't considered how, or if, they will communicate the pay ratio even though employees' reaction to the disclosure is their greatest concern." (Willis Towers Watson)
So, You Think You Don't Need to Worry About Your Clawback Policy Because the SEC Has Not Issued Final Rules?
"Less than 24 hours after news of the data breach at Equifax was reported, we saw politicians and the media demanding compensation clawbacks.... [T]he board of Equifax [is expected] to announce soon its decision on whether to claw back compensation from key executives, particularly the former CEO and former chief security officer, who have both left the company since the news. While we wait to hear from the board, let's look at what might happen if a company does not claw back compensation." (Winston & Strawn LLP)
[Guidance Overview] Pay Ratio Disclosure Is 'On Schedule': SEC Issues Additional Guidance
"In testimony last week before the Senate Committee on Banking, Housing and Urban Affairs, [SEC] Chair Jay Clayton advised that the pay ratio disclosure rule 'will continue to be implemented on schedule.' To that end, the SEC and the Staff of the SEC's Division of Corporation Finance recently issued new guidance to assist companies in preparing their pay ratio disclosure as the compliance date approaches." (Drinker Biddle)
[Guidance Overview] Helpful Recent SEC Guidance on CEO Pay Ratio Disclosure
"To identify the median employee, companies may use existing internal records, such as tax or payroll records, which reasonably reflect annual compensation, even if those records do not include every element of compensation, such as equity awards widely distributed to employees.... Previous guidance indicated that companies may apply statistical sampling and other methods to identify the median employee. The SEC has clarified that companies are permitted to combine methods, applying the ones that best suit the facts and circumstances." (Morgan Lewis)
The Trump/GOP Tax Reform Framework: What It Means for Stock Compensation
"[T]he proposed changes that are likely to have an indirect impact on stock compensation include: simplification of individual income tax rates; elimination of the AMT; [and] elimination of the estate tax. Notably, the framework proposes to give Congress the prerogative to create a higher top income tax rate for the wealthiest individuals, in addition to the three tax rates presented. That would almost certainly apply to executives with stock compensation." (
[Guidance Overview] SEC Relaxes Pay Ratio Rules to Facilitate 2018 Proxy Disclosures
"The SEC expanded the flexibility afforded by the pay ratio disclosure rule. The latest guidance should alleviate some compliance costs and administrative burdens for many issuers.... Now that the pay-ratio rule is confirmed to be in place for reporting in 2018, it is rather unlikely that Congress will take any immediate action that would preclude pay-ratio reporting or otherwise lead the SEC to reconsider the pay ratio rules." (Orrick)

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