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Executive benefits

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The Do's and Don'ts of CEO Pay Ratio Communications
"[D]isclosing the median worker's job title helps personalize a company's brand and may be worthwhile to consider for an organization in a single line of business.... It's trickier to decide whether or not to provide a peer comparison for the CEO pay ratio disclosure ... [It] will be difficult to anticipate what pay ratios will be at peer companies, which will make it a riskier proposition because of the potential variability of CEO pay at those peers.... [It's] worthwhile to draft messages that incorporate your employee value proposition, helping you frame your company's narrative." (Willis Towers Watson)
Prepare for the Impact of Four Accounting Rule Changes
"[F]our recent changes in the accounting rules [may] have an impact on equity and other incentive compensation in the upcoming award and proxy season. The first two are well-known to executive compensation professionals. The second two do not directly relate to equity compensation, but could affect the financial performance metrics for outstanding grants and future grants, especially those with performance periods that include the 2017 fiscal year[.]" (Winston & Strawn LLP)
Do Performance Shares Actually Perform?
"In the sample plan [evaluated by two MIT professors], 50% of each grant ... is tied to TSR relative to 11 peers over a three-year period. Although the company's annualized TSR ranked 10th, the CEO still received 80% of the target payout. The authors opine that this is not truly 'pay for performance.' Instead, they reason, if the TSR ranks in the lower half of the peer group, the payout should be less than half." (
[Guidance Overview] Nonqualified Plans May Need to Be Updated for New Disability Claims Procedure Regs
"While nonqualified deferred compensation plans are generally exempt from most of the substantive provisions of [ERISA], Nonqualified Plans are still subject to ERISA's enforcement provisions, including claims regulations implementing section 503 of ERISA. For that reason, a Nonqualified Plan must contain claims procedures that comply with the ERISA claims regulations for resolving participant claims under Nonqualified Plans." (Trucker Huss)
Executive Compensation Priorities, Fall 2017
"Preparations for CEO pay ratio disclosures should be underway.... Check equity plans and bonus plans to determine whether shareholder reapproval is necessary.... Review the performance metrics and targets used for 2017 annual and long-term grants to determine whether changes should be made for 2018 grants.... Review compliance with Section 409A of the IRC.... Ensure that 'top hat' plans continue to be limited to a select group of management or highly compensated employees." (Morgan Lewis)
Get Ready for the Pay Ratio Disclosure Rule (PDF)
"[C]ompanies should be working on the assumption that pay ratio disclosure will be required for 2018 proxy statements.... While it is still possible that the SEC could delay the implementation date for pay ratio disclosure, there have been no public announcements from the SEC that this is under consideration. In addition, it does not seem likely that the SEC would take action on the pay ratio requirement before any of the currently vacant commissioner positions are filled." (Mayer Brown)
[Guidance Overview] IRS Signals Key Golden Parachute Items for Review on Audit
"In early 2017, the IRS updated its Golden Parachute Payments Guide (Audit Techniques Guide) for the first time since its 2005 issuance. While intended as an internal reference for IRS agents conducting golden parachute examinations, [the Guide] offers valuable insight for both public and private companies, and recipients of golden parachute payments, into how IRS agents are likely to approach golden parachutes when conducting an audit." (McDermott Will & Emery)
How to Boost the Value of NQDC Plans
"Future liabilities with respect to each executive in a company's NDQC plan rise and fall with the changing notional value of plan investments that the executive chooses. One [way] of hedging that volatility is purchasing the same funds in the same amounts as the investments that executives make in their own NDQC accounts.... The other common hedging method is purchasing company-owned life insurance ... With a [total return swap (TRS)] ... a company enters into a contract whereby it pays a bank LIBOR plus an additional fee in exchange for the returns on a basket of mutual funds." (CFO)
Preference for Annual Say-on-Pay Votes Grows -- For Now
"2017 data indicate a growing preference for annual say-on-pay frequency recommendations and adoptions, although possible future legislation could alter the course of this trend.... [In] 2011, companies that recommended annual and triennial frequencies each represented sizeable portions of all public companies queried. In 2017 ... far more companies are recommending an annual frequency compared with 2011." (Willis Towers Watson)
[Guidance Overview] Brace for 2018: The SEC's Pay Ratio Rule
"Develop a process for collection of information, and consider a reasonable, documented approach to the calculation that is defensible to the SEC, investors and employees.... Conduct a simulated exercise ('dry run') of the pay ratio calculation and disclosure using 2017 compensation data as a baseline.... In drafting disclosures, consider how to frame the methodology, including assumptions, adjustments and any exemptions relied upon.... Provide the compensation committee with a draft of the CEO pay ratio disclosure as early as possible." (Pillsbury Winthrop Shaw Pittman LLP)
The CEO-to-Employee Pay Ratio Rule: Consider Your Company's Messaging
"[1] Consider the entire range of stakeholders who will review your pay ratio disclosure ... [2] Consider how your operations may differ from your competitors and what data is under your control ... [3] Consider disclosing additional ratios that may provide greater context ... [4] Consider highlighting validating messages ... this new disclosure is likely to have important, and possibly unforeseen, implications for engagement regarding compensation as well as the potential to impact proxy voting decisions." (Bloomberg BNA)
2018 ISS Policy Survey Queries Use of Pay Ratio
"ISS asks two questions about how the U.S. pay ratio will be used.... [1] [H]ow the data will be analyzed and whether it will be used to compare companies, to assess year-on-year changes at an individual company, or not used at all.... [2] [H]ow shareholders should use the pay ratio -- as a data point for evaluating compensation related votes, for evaluating director votes, to assist in engaging with companies, as a 'risk factor' in making investment, or not at all because it will not be meaningful to investors." (HR Policy Association)
[Opinion] Business Roundtable Comments to SEC on Reconsideration of CEO Pay Ratio Rule
"[We] believe the rule should be changed to exclude employees located outside of the United States in determining the median employee. Doing so would create a more consistent common denominator in the many variables that exist in formulating the ratio. In addition, we suggest that non-full time employees be exempt from the rule to provide some protection against distorted results." (Business Roundtable [BRT])
Developments in Tax Withholding for Equity Awards Under Employer Stock Plans
"When an employee exercises or settles an award such as a stock option or restricted stock unit, there is often a measure of value that must be included in the employee's compensation income. Consequently, employers are required to withhold and remit payroll and income taxes with respect to that compensation, and employers will typically require employees to satisfy their portion of those taxes.... Two recent developments -- one in the accounting arena and the second in securities law -- affect how this withholding can be handled." (Holland & Hart LLP)
Where Is SEC Headed on CEO Pay Ratio and Other Compensation-Related Issues?
"[T]he SEC recently updated its list of regulatory initiatives that it plans to complete during the second half of 2017, and moved the following [Dodd-Frank] provisions from this agenda to the long-term agenda: [1] Pay versus performance disclosures (Sec. 953(a)); mandatory clawbacks for financial restatements (Sec. 954); [3] hedging policy disclosures (Sec. 955); and [3] compensation prohibitions for covered financial institutions (Sec. 956). This likely means we will not see a short-term move to finalize any of these proposals[.]" (Willis Towers Watson)
Compensation for Outside Corporate Directors Stabilizing
"Total pay for outside directors at the nation's largest corporations increased by a modest 2% in 2016, driven by increases in both cash and stock compensation ... [Of] all pay elements in a director's total package, the annual cash retainer for board service experienced the largest increase, jumping 6% in 2016." (Willis Towers Watson)
[Opinion] Goodbye to the Rules on Incentive Compensation Risk for Financial Institutions?
"This is a godsend not just for financial institutions, but for the rest of corporate America. The onerous and prescriptive proposed rules issued in April 2016 would have wreaked havoc on the affected institutions by substantially increasing their compliance and compensation costs and reducing their ability to compete for talent in the marketplace." (Winston & Strawn LLP)
SEC Under Trump Slashes Rulemaking Agenda
"The list released July 20 has 33 items in the proposed and final rule stages ... Missing from the docket are proposed Dodd-Frank Act rules on the orderly liquidation of large broker-dealers and disclosure of the relationship between executive compensation and a company's financial showing, also known as pay versus performance. They were among 62 items in the pre-rule, proposed rule, and final rule stages on the fall 2016 agenda[.]" (Bloomberg BNA)
Public Company Summer/Fall To-Do List: 5 Steps Toward CEO Pay Ratio Disclosure
"[1] Form a team.... [2] Determine the message and audience.... [3] [G]ather, and process the data necessary to determine the median employee and the median employee's compensation.... [4] Decide how and where in the proxy statement to present the CEO Pay Ratio disclosure and prepare a mockup of the disclosure.... [5] Determine the corporate governance process and an appropriate timeline for completing the process." (Latham & Watkins)
Company Discretionary Offer of Voluntary Separation Agreements Did Not Create ERISA-Covered Severance Plan
"[T]he District Court found that having an administrative scheme by itself did not establish an informal ERISA-covered severance plan.... [T]he Court found that a reasonable person could not determine the class of intended beneficiaries, the intended benefits or the process to request VSA benefits. Accordingly, Quest did not create an informal ERISA plan." [Mance v. Quest Diagnostics Inc., No. 12-7361 (D.N.J. Feb. 21, 2017; unpub.)] (Jackson Lewis P.C.)
Executive Compensation: A Survey of Theory and Evidence
"[The authors] discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. [This research] has two main goals.... [1] [T]ightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay.... [2] [P]rovide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research." (National Bureau of Economic Research [NBER])
Reminder on CEO Pay Ratio Disclosure for 2018
"[T]he process for a company to identify its median employee, calculate that employee's annual total compensation, calculate the pay ratio, and prepare any accompanying narrative disclosure can be a significant and time-intensive undertaking. Since a repeal or delay of the pay ratio rule appears increasingly less likely, [the authors] recommend that companies continue to prepare or, for those that have not yet started, begin the process of preparing the methodology they will use to develop their CEO pay ratio disclosure ... In addition, companies may want to consider the impact on its workforce of disclosing the compensation of the company's median employee." (Ropes & Gray LLP)
Does a High CEO Pay Ratio Harm Company Value?
"[E]ven when controlling for the portion of pay linked to stock performance, the relationship between CEO pay ratio and stock price remains strong.... [On] average, a company with a CEO-worker pay ratio at the 85th percentile has a return on assets 13% higher than that of a firm at the median." (CFO)
CEO Pay Packages See Largest Increase Since 2013
"Over the study period, a growing number of companies started granting performance-based long-term incentives (LTI) to their chief executives, reaching 81.5 percent of Equilar 500 companies in 2016. Meanwhile, the prevalence of CEOs receiving time-based stock options fell to a five-year low of 50 percent in 2016." (Society for Human Resource Management [SHRM])
SEC Commissioner Addresses Prospects for CEO Pay Ratio
"In terms of delaying effectiveness of the rule, [Commissioner Piwowar] stated that public commentary would determine whether that alternative is feasible in light of the associated costs and benefits of implementing the rule. Though the latest comment period on the rule has ended, he urged interested parties to continue to submit comment letters describing specific reasons why the rule is burdensome, as well as proposed fixes. During the latest comment period, the SEC received approximately 180 unique comments, with 150 of those comments in favor of the rule." (Dorsey)
CEO Pay Packages See Largest Increase Since 2013
"The healthcare sector reported the largest CEO pay packages in 2016 at a median $13.3 million. Median value of stock awards climbed more than 9% between 2015 and 2016, and 43% since 2012. On average, CEOs received about 32% of total reported compensation in cash, 65% in equity and 3% in other compensation in 2016." (Meridian Compensation Partners, LLC)
IRS Addresses Back-to-Back Arrangement's Failure to Comply with Section 409A
"The back-to-back arrangement involved a foreign investment fund, the ultimate service recipient (USR), and its investment manager, the intermediate service recipient (ISR). The fund and its manager were parties to a deferred compensation arrangement (the USR plan) under which the manager deferred some of its management and performance fees. The manager sponsored a deferred compensation arrangement for its employees (the ISR plan). Under the plans, the deferral elections and payment events triggering payments from the fund to the manager were coordinated with the deferral elections and payment events triggering payments from the manager to its employees. The IRS concluded that the USR plan did not meet the requirements of Section 409A." (Thomson Reuters Practical Law)
New York Appellate Court Issues Decision on Executive Compensation Order and Regs
"[T]he four-Justice majority concluded that 'limit on administrative costs and executive compensation paid for by state funds and state-authorized payments, [does not] violate the separation of powers doctrine.' In contrast, the Court said that DOH exceeded its authority by imposing the soft cap and restricting executive compensation paid from non-state dollars.... As a result, there is now a conflict between the Appellate Division's Third Department and Second Department, which previously upheld Governor Cuomo's Executive Order and DOH's implementing regulations." [LeadingAge New York, Inc. v. Shah No. 523308 (N.Y. App. Div. June 22, 2017)] (Greenberg Traurig)
An Open or Closed Section 409A Case (PDF)
"One unresolved issue that has caused significant concern among practitioners is whether a failure to timely distribute an amount of deferred compensation in a taxable year that becomes time-barred by the statute of limitations for tax assessments (a 'closed' year) continues to result in liability under Section 409A in a subsequent taxable year that is not time-barred (an 'open' year). This article briefly describes the applicable law and available guidance, illustrates the issue in an example, and provides two plausible analyses that result in dramatically divergent tax results." (Groom Law Group, via Bloomberg Law Pension & Benefits Daily)
New York Court Addresses State's Limits on Executive Compensation and Administrative Costs of State-Funded Providers
"The [New York State Appellate Division, Third Department] affirmed the decision of the court below and upheld the 'hard' cap imposed by the [Department of Health (DOH)] -- capping state dollars for executive compensation at $199,000 -- but determined that the DOH exceeded its authority with respect to the 'soft' cap -- regulating executive compensation from all sources of funding. This decision is in conflict with earlier decisions rendered by the Appellate Division, Second Department upholding the soft cap as well as the hard cap, and sets up a possible appeal to the New York State Court of Appeals." [LeadingAge New York, Inc. v. Shah No. 523308 (N.Y. App. Div. June 22, 2017)] (Cadwalader, Wickersham & Taft LLP)
[Official Guidance] Text of IRS Chief Counsel Memorandum: Application of Section 409A to Back-to-Back Arrangement (PDF)
10 pages. "Treas. Reg. Section 1.409A-3(i)(6) provides that the amount of the payment under the ultimate service recipient plan may not exceed the amount of the payment under the intermediate service recipient plan. Therefore, the USR Plan fails to meet the requirements of section 409A because the USR Plan provision providing for a payment to Taxpayer in the event of a Participant's separation from service before vesting is an impermissible payment event." [CCM 201725027, Mar. 6, 2017, published online June 23, 2017.] (Internal Revenue Service [IRS])
Proposed Changes to Section 409A Regs: Greater Clarity and Better Planning Alternatives (PDF)
"Since its inception, the IRS has issued significant guidance under Section 409A, including close to 400 pages of final regulations and a number of other notices. However, the law in this area continues to evolve, and the most recent proposed regulations provided under Section 409A are intended to clarify and modify certain issues that posed problems for employers." (McDermott Will & Emery, via The Practical Tax Lawyer)
Intricate Mix of Restricted Stock, Performance Shares, and Stock Options in LTI Vehicles
"While the rise of restricted stock/RSUs and performance shares, along with the relative decline of stock options, has been well documented for many years, ... stock options have not disappeared but are often being granted to supplement full-value awards such as restricted stock and performance shares, especially in long-term incentives (LTIs) designed for executives." (
Trump Tax Proposal Could Create Compensation-Related Opportunities
"A change in value of corporate tax deductions could, with proper tax planning, provide opportunities for substantial savings on compensation plans and arrangements. In the short term, potential savings would be possible from tax deductions on annual cash bonus payments and retirement plan contributions, while the long-term impact could involve significant changes to the structuring of compensation plans." (Skadden, Arps, Slate, Meagher & Flom LLP)
Beyond the 403(b): Things to Know About Deferred Comp for Executives of Non-Profit Organizations
"[1] First, there are two types of 457 plans: 457(b) plans and 457(f) plans.... [2] You (usually) can't roll to an IRA.... [3] The assets belong to the organization.... [4] The normal 'reasonable compensation' rules still apply.... [5] DOL notification is required." (E is for ERISA)
Shareholder Proposals on Executive Compensation Decrease in 2017
"Through May 31, 2017, 330 shareholder proposals had gone to a vote. Thus far, the most common proposals have involved climate change, the environment, and sustainability. Together with proposals requiring reports on lobbying payments and policies, political contributions, holy land principles, and gender diversity and equality proposals, these 'political' proposals accounted for nearly one-half of the proposals so far. Proposals on executive compensation failed even to make the top ten." (Winston & Strawn LLP)
Why Proper Disclosure of Executive Perks Is Important (PDF)
"Between 2009 and 2014, [MDC Parners Inc.] disclosed in its proxy statements some, but not all, of the perquisites paid to [former CEO, Miles S. Nadal] and on his behalf. The estimated $11.285 million worth of perquisites that MDC failed to disclose included private aircraft usage, club memberships, cosmetic surgery, yacht- and sports car-related expenses, jewelry, charitable donations, pet care, and personal travel expenses.... The SEC not only took action against MDC as an issuer, but also against Nadal individually since his compensation was not fully disclosed.... The SEC penalties may not be MDC's or Nadal's only legal problem." (King & Spalding)
FASB Issues Helpful Guidance on Accounting for Equity-Based Compensation
"The ASU should reduce the instances that an entity is required to apply modification accounting to a share-based payment award.... The ASU streamlines the application of modification accounting by stating that when making a change to the terms or conditions of a share-based payment award, a company should apply modification accounting to the award, unless each of [three] conditions is met[.]" (Winston & Strawn LLP)
CEO Pay Disclosure: Preparing for Compliance or Hoping for a Delay?
"The final Pay Ratio Disclosure rule requires public companies in the U.S. to disclose the ratio of CEO pay to median employee pay with their 2018 proxy statements, with reporting based on fiscal year 2017 pay.... As companies consider their approach to pay ratio calculations, it's time to think through an overall strategy.... Employees generally question their pay appropriateness, so it's important for you to be prepared if they react strongly to the pay ratio and the median employee pay figure used to calculate it." (Willis Towers Watson)
How Do I Count My Performance Share Awards? Let Me Count the Ways
"[T]here are 16 different purposes for which a company must count its performance share awards, some of which are the same, but many of which are different. When a company or compensation committee awards performance shares or performance share units, the number of shares delivered to the participant generally depends upon the degree of satisfaction of the performance goals set forth in the award agreement." (Winston & Strawn LLP)
Providing Voluntary Separation Agreements to Some Employees Did Not Create an Informal ERISA Severance Plan
"A sales manager sued her former employer following her involuntary termination of employment, asserting that she was entitled to severance benefits because the employer's practice of providing voluntary separation agreements (VSAs) to some departing employees created an informal ERISA plan. But the court ruled in favor of the employer, concluding that, although there was a document outlining the employer's process for executing VSAs, without additional evidence indicating that the employer intended to create an ongoing benefit arrangement the employer's practice and the process document were not enough to create an ERISA plan." [Mance v. Quest Diagnostics Inc., No 12-7361 (D.N.J. Feb. 21, 2017)] (Thomson Reuters / EBIA)
Severance Plans and ERISA
"[Y]ou may want to make your severance plan subject to ERISA.... [I]ncentive plans generally would become subject to ERISA as an employee pension benefit plan, while severance plans generally would be subject to ERISA as employee welfare benefit plans. In fact, ERISA contains numerous advantages for the employer/plan sponsor[.]" (Winston & Strawn LLP)
2017 Executive Compensation Trends and Developments
"[The survey] and its results are intended to provide an overview of the current environment and signal the direction in which companies are moving with respect to executive compensation and corporate governance practices. This survey features responses from 118 companies across a diverse range of industries, covering topics such as annual and long-term incentive plan designs, Say on Pay, the CEO pay ratio, and more." (Meridian Compensation Partners, LLC)
SEC Charges CEO With Failing to Disclose Perks to Shareholders
"[T]he SEC's investigation found that without disclosing information to investors as required, MDC Partners paid for [the CEO's] personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks ... [totaling] an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances. He has since resigned and returned $11.285 million to the company." (U.S. Securities and Exchange Commission [SEC])
Further Clarification on Director Independence in Litigation
"During the last five years, while plaintiffs and the Delaware courts have been expanding the litigation risks for the compensation decisions of non-employee directors, the Delaware courts also have been expanding their scrutiny of the disinterested status of directors.... [In] many (and, probably, soon to be more) of the recent cases that involve executive or director compensation, the independence of non-employee directors is at the core of many of the defendants' motions to dismiss." (Winston & Strawn LLP)
ACA Repeal and Replacement, Take Two: Impact on Stock Compensation
"The AHCA would eliminate the Net Investment Income Tax: a 3.8% Medicare surtax on investment income, including capital gains, dividends, and interest. Meanwhile, an amendment to the House bill would delay until 2023 the repeal of the Additional Medicare Tax (0.9%) on ordinary income ... Currently ... companies must withhold the 0.9% additional Medicare tax on any type of pay, including that from stock compensation ... when an employee's wages for the year are more than $200,000. While the legislation would remove that requirement, it would not do so until after 2022." (
2017 Proxy Analysis: A New Normal Meets a New Reality
"Executive pay practices settled in to a new normal in 2016, characterized by modest pay increases, continued emphasis on performance-oriented compensation, and annual and long-term incentive (LTI) plan design features and metrics consistent with those of recent years.... Overall, CEO compensation levels increased modestly, as base salary and target bonus increased 2% and 3%, respectively, consistent with the rate of increases in 2015.... Target long-term incentive values ... increased 4% in 2016, compared to 9% in 2015." (Willis Towers Watson)
[Guidance Overview] To Defer or Not to Defer? Same-Year Deferral Options under Section 409A
"[If] anticipated tax-reform efforts result in lowering individual tax rates, individuals may wish to defer 2017 income into later years.... [D]eferral elections with respect to calendar year compensation ... are generally required to be made by December 31 of the calendar year that precedes the year in which the services for such compensation are first performed. However, under certain circumstances, it is permissible under Section 409A to make an initial deferral election after the calendar year has commenced." (Morgan Lewis)
CHOICE Act Targets Fiduciary Rule, Dodd-Frank Rollback
"Passage of the CHOICE Act by the House Financial Services Committee could signal a further blow to conflict of interest regulations adopted by the Obama administration.... The legislation is sweeping and would undo or replace much of the Dodd-Frank Wall Street reforms adopted by Democrats when they held significant majorities in the wake of the 2008-09 financial crisis." (planadviser)
Anatomy of Incentive Compensation (PDF)
"The purpose of any incentive plan is to motivate employees to behave in certain ways. The key to success is to carefully identify the employees to target, the desired behavior, the best way to motivate that behavior and any constraints based on the company's situation." [The article provides a checklist of items for consideration in designing a plan and a chart of various forms of incentive compensation.] (Husch Blackwell)
IRS Ruling Underscores Need for NQDC Plans to Diligently Adhere to Special FICA Rules
"In the Chief Counsel Memorandum released earlier this year, the IRS indicated that it will not enter into closing agreements with employers that fail to subject NQDC to FICA taxes as required under the special timing rule in Section 3121(v)(2) of the tax code and the taxable years in which FICA taxation should have occurred are statutorily closed.... The application of the special timing rule in Section 3121(v)(2) is exceedingly complex, and ... it is not uncommon for employers to make mistakes." (Willis Towers Watson)
Follow-Up on Incentive Plans and ERISA
"Whether an arrangement gives rise to the 'systematic' deferral of payment to termination or beyond depends on the facts and circumstances of the arrangement. Some of the relevant circumstances for the determination are: [1] Whether [the] arrangement's design results in a high percentage of bonus payouts being made at or near recipients' retirement age; [2] Whether the employer communicates the plan to employees as an arrangement intended to provide retirement or deferred income; [3] Whether the arrangement allows for payments of unvested amounts upon employment termination; [4] The length of the payout period; and [5] Whether the bonus payments, by operation of the plan, are made to another type of retirement account such as an IRA. Federal court decisions have produced different results based on the facts of the particular case." (Winston & Strawn LLP)
Senate Confirms Jay Clayton as SEC Chairman
"Jay Clayton was approved Tuesday by the Senate to serve as chairman of the Securities and Exchange Commission. Mr. Clayton was approved by a 61-37 vote, with several Democrats supporting him. Commissioner Michael Piwowar has been serving as acting chairman since Mary Jo White departed in January." (Pensions & Investments)
Trump's Tax Reform Principles Could Affect Stock Compensation
"The proposals merely cut off the current top tax brackets, which could mean that anyone currently in the brackets between 25% and the new top bracket would get stuck paying a higher rate both on ordinary income and on short- and long-term capital gains.... Aside from the most senior executives, individuals with stock compensation tend to be in that income range." (
Could Your Incentive Plan Be Subject to ERISA?
"Many incentive or bonus plans make payments or deliver stock within 2-1/2 months after the end of the year the participant became vested in order comply with the short-term deferral exception of Code Section 409A. However, some incentive plans provide for accumulations, multi-year periods, and mandatory deferrals. These plans may unwittingly become subject to ERISA's requirements." (Winston & Strawn LLP)
Unexpected Risks of Early Exercise ISOs
"Companies that permit the grant of early exercise incentive stock options (ISOs) do so primarily to limit the impact of the alternative minimum tax (AMT). However, due to fairly counterintuitive tax regulations, structuring options in this fashion can expose optionees to negative tax consequences in the event of a disqualifying disposition. This [article] reviews the tax effects of early exercise ISOs and compares the tax results to alternate structures." (Dorsey & Whitney LLP)
[Guidance Overview] How a 'Substantial Risk of Forfeiture' Operates Under Various Kinds of Nonqualified Plans
"This practice note discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, and 3121(v)(2) of the Internal Revenue Code (I.R.C.) (referred to hereafter as Section 83, Section 409A, etc.) and the different consequences of the failure to achieve a SRF under each such section. SRF is the standard that the I.R.C. and Treasury Regulations apply to determine when an employee's or an independent contractor's deferred compensation (or transfer of compensatory property) vests, and therefore (depending upon the particular I.R.C. section) may be includable in income for the individual (or deductible for the employer or other controlled group member granting the compensation)." (Venable LLP)
Total CEO Pay in U.S. Companies Rose 6% in 2016
"[T]otal pay for CEOs increased 6% in 2016, up from the 4% median increase in 2015. Total pay as reported in the Summary Compensation Table in company proxy statements includes base salary; actual annual and long-term cash bonuses; the grant-date value of long-term incentives (LTIs) including stock options, restricted stock and long-term performance shares; the value of perquisites; earnings from deferred compensation; and the change in value of executive pensions." (Willis Towers Watson)
Wells Fargo Shows Its Claws
"Months after the revelations that Wells Fargo had engaged in highly questionable (some say illegal) practices, including creating fraudulent accounts, its board of directors has taken action to recoup some of the compensation from the bank's leaders during the time the nefarious schemes were ongoing." (HRE Daily)
Follow-Up on Litigation Over Non-Employee Director Stock Awards
"[T]he Delaware Chancery Court upheld the decision of Investors Bancorp directors' to award themselves restricted stock and stock options under a plan previously approved by the company's stockholders.... However, the Court indicated that it would not automatically waive through all non-employee director awards under shareholder approved equity compensation plans -- even plans with limits on awards to non-employee directors." (Winston & Strawn LLP)

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