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Executive benefits

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[Guidance Overview] IRS Issues Interim Guidance Under Notice 2019-09 on Section 4960 Excise Tax for Tax-Exempt Organizations and Certain Governmental Entities
"For purposes of Code section 4960, remuneration means wages subject to federal income tax withholding under Code section 3401(a). Excluded from this definition are payments from tax-qualified plans, Code sections 403(b) and 457(b) plans, payments for medical or veterinary services performed by a medical professional, and payments to a non-highly compensated employee as determined by Code section 414(q)." (Trucker Huss)
Interesting Battles Over Compensation Clawback Shareholder Proposals
"Apparently, Alphabet does not currently have a clawback policy in place, and a number of union pension funds are leading the charge to make them adopt a plain vanilla policy.... The proposal filed at Mylan N.V. is more complicated and ... more interesting, as it presents the issue: Where does the buck stop, when it comes to alleged corporate wrongdoing?" (Winston & Strawn LLP)
Ninth Circuit Upholds Treasury Regulation on Stock-Based Compensation
"Last year, the Ninth Circuit withdrew its previous opinion in the case -- a 2-1 split decision -- due to one of the judges passing away prior to publication. Unfortunately for taxpayers, the newly assigned judge agreed with the deceased judge, and the court's new opinion reflects neither a change in outcome nor a change in the overall analysis. Nevertheless, the court refined and clarified its analysis on a few key points. The decision has particular importance for multinational companies in the technology sector that invest substantial sums in developing intangible assets." [Altera Corp. v. Comm'r, Nos. 16-70496, 16-70497 (9th Cir. Aug. 7, 2018)] (Shearman & Sterling LLP)
Nonqualified Deferred Comp Plans: The 401(k) Excess Contribution Solution
"A 401(k) refund immediately becomes unplanned taxable income for the employees, and potentially a lost opportunity to collect company matching dollars for 401(k) savings.... Nonqualified deferred compensation plans (NQDC) can be designed to allow plan participants to defer an amount of their base salary equal to the refund, to create a tax neutral event for the year in which the refund occurs." (Fulcrum Partners LLC)
Panel Discussion: Current Issues in Employee Benefits & Executive Compensation
"What EBEC issue has had the greatest impact on your clients in the past 12 months? ... What is the most interesting EBEC matter on your desk right now and what are the issues involved? ... Are there any EBEC issues that are on the horizon that could significantly impact your clients and/or your practice? Can you describe the potential impact?" (Thomson Reuters Practical Law)
DOL Requires Electronic Filing for Top Hat, Apprenticeship, and Training Benefits
"Failure to submit the top hat plan statement does not result in penalties but does subject the plan to expanded reporting and disclosure requirements. Similarly, welfare benefit plans that provide only apprenticeship or training benefits, or both, are exempt from reporting and disclosure if a notice is [submitted] to the DOL and the plan administrator discloses certain information to employees participating, or eligible to enroll, in the plan.... Effective August 16, 2019, the final regulations require electronic submission of these notices and statements through DOL's website." (Buck)
[Official Guidance] Text of DOL Final Regs: Electronic Filing of Notices for Apprenticeship and Training Plans and Statements for 'Top Hat' Plans
13 pages. "This document contains final regulations that revise the procedures for filing apprenticeship and training plan notices and 'top hat' plan statements with the Secretary of Labor. The final regulations require electronic submission of these notices and statements, as opposed to paper filings. The final regulations will make filing these notices and statements easier and lower regulatory burdens on these plans. The final regulations also will enable the [DOL] to make reported data more readily available to participants and beneficiaries and other interested members of the public than in the past." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
How Should Boards Handle Involuntary CEO Retirement?
"[I]nvoluntary retirement scenarios are kind of uncharted territory.... Companies should consider incorporating an involuntary retirement provision in new employment agreements, new award agreements or long-term incentive plans going forward. Make it transparent, explicit up front, and set the expectation that if there's a termination that meets these qualifications, it might be handled a different way than an involuntary termination." (Meridian Compensation Partners, LLC)
[Guidance Overview] Section 4960 Excise Tax: What Tax-Exempt Employers Need to Know
"Not just for tax exempt organizations ... Once a covered employee, always a covered employee ... Remuneration paid means remuneration vested ... Exclusion for remuneration for medical and veterinary services ... Excess parachute payments ... No grandfathering for amounts credited prior to effective date ... No indexing ... Positions deemed not in good faith." (Thompson Coburn)
Using Rabbi Trusts to Fund Nonqualified Plan Benefits
"Rabbi trusts have been maintained to support non-qualified plans since the early 1980s. A rabbi trust is a grantor trust (typically with an independent financial institution serving as trustee) that is used by employers in order to accumulate assets to defray benefit obligations under a non-qualified plan. The rabbi trust is usually irrevocable, although it can be designed to be revocable until the happening of certain events such as a change in control." (Newport Group)
The State of Play on Clawbacks and Forfeitures Based on Misconduct
"[B]ecause implementation of the proposed Dodd-Frank clawback rules may never be finalized, companies are beginning to implement or update executive compensation recoupment and forfeiture rules on their own based on investor sentiment, good governance principles, and recent events at CBS (and other #MeToo moments), Nissan, Equifax and other examples of supervisory failure." (Pillsbury Winthrop Shaw Pittman LLP)
Inspector General Assessment of IRS Implementation Planning Efforts for the Excise Tax on Excess Compensation Paid by Tax-Exempt Organizations (PDF)
23 pages. "TE/GE Division management has not completed a strategy to address noncompliance with the new tax. Although TE/GE Division management acknowledged the need for a compliance strategy and took preliminary steps in that process, as of December 31, 2018, they had not established a timeline for further development and implementation of compliance activities. Affected organizations will begin reporting the excise tax on returns filed as early as May 2019. A fully developed compliance strategy is needed to monitor and track potential noncompliance with the new excise tax." (Treasury Inspector General for Tax Administration [TIGTA])
Not All Is Lost for California Employers: Enforce Non-Compete Forfeiture Provisions Through ERISA Top Hat Plans?
"[It] may be possible for employers to enforce non-competition forfeiture provisions by including them in deferred compensation top hat plans subject to [ERISA].... This may represent a paradigm shift for employers operating in California; the potential loss of deferred compensation by key employees might meaningfully deter employees from competing, or at least make the choice to compete more difficult. On the other hand, a forfeiture provision may not be enough to change employee behavior or assure the safety of trade secrets and other confidential information." (Seyfarth Shaw)
Delaware Reaffirms Entire Fairness Standard for Review of Director Compensation
"[T]he Delaware Court of Chancery ... reaffirmed that in most circumstances decisions of directors awarding director compensation are subject to review under the entire fairness standard. The Court also addressed the possibility of stockholder waiver of application of that standard to future director actions ... The litigation addressed compensation of Goldman Sachs' directors -- primarily the stock incentive plans ... approved by Goldman Sachs stockholders in 2013 and 2015." Stein v. Blankfein, No.  2017-0354 (Del. Chanc. May 31, 2019)] (
Is Your Nonqualified Plan Causing You Anxiety?
"Although nonqualified plans tend to involve few eligible participants and infrequent transactions, plan errors can be highly visible, as they often impact C-suite executives and may require disclosure in individual and/or corporate tax returns." (Voya)
Deal-Breaking M&A Issues Related to Employee Benefit Plans and Executive Compensation
"The list [in this article] is intended to facilitate the detection, negotiation, and resolution of possible employee benefit plan and executive compensation-related problems.... [S]ellers may defuse risks and streamline negotiations through proactive pre-sale planning.... [B]uyers may maximize their deal-related protections (and their post-closing alternatives) by assuring early stage attention to [these items]." (The Wagner Law Group)
Post-Proxy Season Considerations for Compensation Committees
"Hedging Policy: All companies will need to make a disclosure (and many will need to make additional disclosures).... [A]ll Companies/Boards should consider whether to eliminate certain provisions and requirements that were placed in the Charter only to satisfy the requirements of (now repealed) performance-based exception of Code Section 162(m).... The only reason for continuing to maintain a Compensation Committee that satisfies the requirements of Code Section 162(m) ... is if there are any unvested or unpaid performance-based awards outstanding and grandfathered." (Winston & Strawn LLP)
Seven Venial Sins of Executive Compensation
"Certain compensation practices are known for raising investor concerns, leading to difficult conversations between investors and boards and higher levels of investor opposition of executive pay programs. But beyond outright egregious practices, a careful review of the diverse set of compensation programs available may reveal some compensation practices that do not appear as significantly concerning but can raise pointed questions about a compensation program's alignment with shareholders' interests." (Institutional Shareholder Services [ISS]; free registration required)
Designing Executive Pay Plans in the New 162(m) World
"Over a year after the 'performance-based compensation' exception to Section 162(m) of the IRS Code was eliminated ... relatively few companies have made significant changes to their pay programs to take advantage of its repeal.... Companies ... are uncertain how shareholders would react even if they recrafted their programs to preserve most performance-based design elements. However, with the recently issued [FAQs from Institutional Shareholder Services (ISS)], there's a bit more clarity about changes that are acceptable and those that are cause for shareholder concern." (Willis Towers Watson)
Debunking SPD Myths: Yes, There Are Reporting Requirements for 'Top Hat' Plans
"Top hat plans remain subject to ERISA's claims and appeal rules, preemption of state law provision, and civil enforcement provisions. Also, a plan administrator must still provide the DOL certain documents upon request.... The DOL maintains the Delinquent Filer Voluntary Compliance Program (DFVCP) under which a plan administrator may voluntarily correct a failure to file the top hat statement." (Dickinson Wright)
New Code Section 83(i) Equity for Private Employers: More Headache Than Benefit?
"A private corporation must grant either options or restricted stock to at least 80 percent of employees within the calendar year.... [If] the business has repurchased stock in the previous year, then they cannot offer the election.... 83(i) election plans are not compatible with other types of stock incentive plans such as incentive stock options (ISOs) and employee stock purchase plans (ESPPs).... At the end of the deferral period ... the employer must withhold income tax equivalent to the tax on the value of the stock at vesting in escrow ... even if the value of the stock has decreased over the deferral period." (Hall Benefits Law)
Evolving and Expanding Demands on Compensation Committees (PDF)
"What are the pros and cons of a combined compensation and governance committee? ... How should boards address managers whose behavior isn't so egregious that they warrant being fired but that nevertheless contribute to a toxic work environment? ... How should boards be thinking about attracting the new generation of talent? ... Should 'known unknowns' be incorporated into evaluating and compensating CEO performance, and if so, how?" (NACD Directorship)
A Top-Hat Plan Primer (PDF)
"Companies that consider nonqualified deferred compensation arrangements for their key executives often focus on how those arrangements are treated for tax purposes. But in the midst of the tax discussion (including the effect of Sections 409A and/or 457(f) of the Internal Revenue Code), it is important not to lose track of the other federal law that governs these arrangements -- ERISA." (Spencer Fane)
[Guidance Overview] Highly Compensated Excise Tax Deadline Imminent
"Set forth [in this article] are the key issues relevant to establishing a reasonable, good faith position under Notice 2019-09 that the Section 4960 excise tax should not apply to volunteer officers of a [private foundation (PF)] who receive all of their compensation from taxable organizations related to such PF. What is important to understand is that the Section 4960 excise tax only applies if volunteer officers are treated as employees of the related PF. Whether an employee relationship exists is a facts and circumstances test, and having someone serve as an officer to meet state law nonprofit corporation requirements does not result, by itself, in employee status." (McDermott Will & Emery)
Vesting Incentive Equity: Time vs. Milestone Vesting Schedules
"Achieving business milestones surely seems a better measure of 'value add' than the simple passage of time, and after all, the whole idea of vesting is to reward folks for adding value, not for passing time. And yet, time-based vesting is still the norm in the startup world. Why is that?" (Michael Best)
[Guidance Overview] Excess Compensation and Parachute Payments by Tax-Exempt Organizations: IRS Interim Guidance
"One issue applicable to certain organizations arises when an ATEO such as a company foundation, family foundation or trade association is under common control with a business corporation or partnership, and an individual is highly compensated by the business corporation or partnership and also provides voluntary services to the ATEO. It seems unreasonable in many situations and inconsistent with the purposes of section 4960 that an uncompensated position with an ATEO could be considered a 'covered employee' position and as such could cause a related corporation or partnership to be subject to an excise tax under section 4960." (Sidley Austin LLP)
Private Company Stock Grants: Recent SEC Filings by Uber and Other IPO Companies Reveal Plan Design Trends
"Some major private companies in the tech sector have recently gone public or are about to.... [One innovation] for employees at private companies is early-exercise stock options. Instead of letting you exercise options only after the vesting date, when you might face a big taxable spread between the exercise price and the fair market value of the stock, the company instead grants options that are immediately exercisable.... Larger, later-stage pre-IPO companies often grant RSUs instead of stock options[.]" (
Executive Compensation Excise Taxes Due Soon
"Both publicly-traded and privately-held companies that have executives who serve as officers or employees of a private foundation controlled by the company are at particular risk, even if the executives receive no pay from the private foundation. Excise tax returns reporting liability under section 4960, and payments of any tax, are due by May 15 for calendar year taxpayers[.]" (Eversheds Sutherland)
Some Executive Compensation Drafting Tips for Employers
"[T]he plaintiff had no sooner reached a $1 million settlement with his former employer over a potential whistleblower claim, when he sued again, arguing that the settlement amount should have been taken into account in calculating his supplemental pension ... The court ... rejected the employer's attempt to have the case dismissed, thereby allowing the (costly and time-consuming) litigation to continue." [Weller v. Linde Pension Excess Program, No. 16-4254 (D.N.J. Apr. 24, 2019; unpub.)] (Winston & Strawn LLP)
[Guidance Overview] The Section 4960 Excise Tax: Application to Tax-Exempt and Affiliated Taxable Entities
"In situations where a for-profit related organization pays the lion's share of the covered employee's remuneration, the for-profit entity could be responsible for a large portion of the excise tax.... Related organizations that are publicly traded should note that any remuneration paid to a covered employee for which a deduction is not allowed by reason of Section 162(m) is not taken into account for purposes of Section 4960." (Wilmer Hale)
Rabbi Trusts: When to Ask and What to Get
"[T]he most notable characteristic of a rabbi trust may be its inability to protect executives against the employer's bankruptcy or technical insolvency.... It is common as a result to say that rabbi trusts merely provide 'change of heart' protection. That protection can, however, be invaluable for an executive if significant severance, deferred compensation, or supplemental retirement benefits are not scheduled to be paid coincidentally with the executive's termination of employment." (The Wagner Law Group)
[Guidance Overview] IRS Issues Guidance on Excise Tax on Executive Compensation Paid by Tax-Exempt Entities
"A public university or community college could fit into one of three categories. One is that the entity, despite being an instrumentality of a state, received a determination letter from the IRS in which the IRS certified that the entity qualified as a tax-exempt organization under Code Section 501 ... Those entities would be subject to the Code Section 4960. Second, an entity separately organized from a state or political subdivision of a state would have its income exempt under Code Section 115(1). That entity also would be subject to Code Section 4960. Some entities, however, rely on the doctrine of 'implied statutory immunity' to avoid federal income taxation, rather than seeking tax-exemption under Code Section 501(a) or excluding income under Code Section 115(1). The Notice explains that such entities are not subject to the Section 4960 excise tax." (Porter Wright Morris & Arthur LLP)
[Guidance Overview] For-Profit and Public Employers Could Become Subject to New 21% Excise Tax on Tax-Exempt Organizations
"Under [Notice 2019-09], all wages paid to the covered employees of the [applicable tax-exempt organization (ATEO)] over $1,000,00 by any related organization, including taxable entities, is subject to the 21% excise tax.... Many companies and other for-profit organizations have established foundations for the benefit of their communities. These companies now could be at risk if they lend employees or otherwise provide employee services to the ATEO. If your company has a foundation, now might be a good time to determine whether any highly paid employees provide services to it." (Winston & Strawn LLP)
Does a Requirement to Pay 'Target Variable Compensation' Include Equity Awards?
"The Court noted the defendants' interpretation of [the severance agreement] was reasonable, but that it was not the only reasonable interpretation. Just as conceivable, according to the Court, was that the term 'Incentive Compensation' could mean certain items that may be paid in cash or equity ('compensation, variable compensation, bonus, benefit') as well as one item that is only paid or payable in cash ('award'). According to the Court, under this interpretation, regardless of whether the equity awards are 'paid or payable in cash,' they would be included in Batty's accrued Incentive Compensation." [Batty v. UCAR International Inc., No. 2018-0376 (Del. Ch. Apr. 3, 2019)] (
Market Benchmark Pay Data in Context
"[M]any companies will review market benchmark pay data in the next few months. When used appropriately, market benchmark data provides a valuable tool to help make informed pay decisions, but should not be used without appropriate context. Consideration must be given to other individual and company-specific factors in evaluating where the executive should fall relative to the benchmark. [This article describes] a few key considerations for the effective use of market pay data." (Meridian Compensation Partners, LLC)
[Guidance Overview] Interim Guidance Under Section 4960: Excise Taxes and Parachute Payments (PDF)
"[This article provides] an overview of Section 4960, summary of the positions taken in [Notice 2019-09], and discussion of whether such positions resolve patent ambiguities or represent interpretations that are aggressive (in our view) or likely to prove administratively daunting, troublesome, or costly to ATEOs, their boards, and management." (Mintz)
Signs Your Not-for-Profit Needs an Executive Compensation Study
"[T]he Tax Cuts and Jobs Act (TCJA) levies an excise tax on not-for-profit organizations for compensation paid above a certain level to any executive. Excise taxes on compensation have traditionally been directed only at for-profit companies, so the consideration of excise tax may be new to your organization. It also makes now as good a time as any to consider whether your organization could benefit from an executive compensation study." (CBIZ)
[Guidance Overview] Who Should the Company's Hedging Policy Cover Under the SEC's New Disclosure Rules?
"Neither the statute nor the SEC's rules are limited to named executive officers.... Some companies will establish (and publicize to employees) policies that broadly prohibit all employees from engaging in hedging transactions, at least with respect to stock received as compensatory awards, under the theory that the prohibition alone will deter most from hedging, even though the company may not be able to monitor compliance effectively.... [The authors] suggest that a company make this decision by first asking: For which individuals in our organization can we realistically monitor compliance?" (Winston & Strawn LLP)
[Guidance Overview] What Constitutes Hedging Under the SEC's New Disclosure Rules?
"[T]he SEC resisted all requests to provide a definition of hedging, instead placing that burden entirely on the company (and counsel). The SEC declined even to state that the purchase and sale of mutual funds, index funds, and other diversified investment vehicles were excluded from the definition of hedging.... So what is a company to do? Should the company attempt to define hedging or provide examples of what sorts of transactions are prohibited?" (Winston & Strawn LLP)
NQDC Issues for the 2019 Tax Season
"The IRS has still not finalized the Section 409A rules on W-2 reporting. Therefore, your company does not need to indicate deferred income on your Form W-2, though it may do so voluntarily in Box 14.... If your plan violates Section 409A and you need to pay a penalty and interest: Report this on Line 62 of IRS Schedule 4 (no longer directly reported on Form 1040).... Nonqualified deferred compensation itself is not an AMT preference item. However, deferrals of income can serve to prevent you from triggering the AMT in a tax year; conversely, income you receive in a distribution can trigger the AMT." (
[Guidance Overview] Executive Compensation: Section 162(m) and the Grandfather Rule
"If the company retains the right to unilaterally amend the plan to reduce or eliminate deferrals and/or accruals ... only the amounts deferred prior to January 1, 2018, would be excluded [from the $1,000,000 deduction limitation]. This becomes important because of the change under TCJA to the definition of 'covered employee,' from those employed in certain positions during the year to a 'once covered always covered' approach." (Hawley Troxell)
Parties Reach Settlement in Investors Bancorp Stockholder Litigation
"Under the settlement agreement, the parties agree that: [1] 2.5 million stock options granted to outside directors as part of the 2015 Equity Awards will be cancelled. [2] 95,694 RSUs granted to outside directors as part of the 2015 Equity Awards that are scheduled to vest in 2020 will be cancelled. [3] All stock options and RSUs granted to [two executive directors] as part of the 2015 Equity Awards and any shares delivered to them under the 2015 Equity Awards will be cancelled." (Thomson Reuters Practical Law)
Beware These Tax-Return Errors with Restricted Stock and RSUs
"[1] Not reporting income until the full grant vests.... [2] Double-reporting income on Form 1040.... [3] Not reporting the stock sale.... [4] Using too low a cost basis for the capital gains calculation.... [5] Miscalculating the number of shares surrendered or sold for taxes." (
[Guidance Overview] Excise Tax on Executive Compensation and Excess Parachute Payments
"On December 31, 2018, over a year after the release of the TCJA, the IRS released Notice 2019-09, which provided 92 pages of much anticipated informal guidance regarding IRC Section 4960. The Notice provided some clarity for tax-exempt organizations ... Excess remuneration ... Common-law employees ... Medical and veterinary services ... Excess parachute payments ... Effective date ... Reporting the liability under Section 4960." (WithumSmith+Brown, PC)
How to Reduce the Tax Impact of Your Stock Options or Restricted Stock Units
"Exercise early-stage ISOs before their value increases ... Make the 83(b) election for early exercise ... Exercise ISOs to AMT crossover point ... Raise your ordinary income with same-day sales ... Exercise ISOs early in the year ... Take deductions in years with high RSU vesting income." (Moss Adams LLP)
Examples of 2019 Pay Ratio Disclosures
"[This article provides] examples of pay ratio disclosures from recently filed proxies where registrants chose to rely on the median employee identified in the prior year. [1] Sabre Corporation ... [2] Seaboard Corporation ... [3] Superior Industries International, Inc.... [4] The Goodyear Tire & Rubber Company." (
Planning for the 4960 Excise Tax on Compensation by Tax-Exempt Organizations
"[T]ax-exempt systems that include more than one related tax-exempt organization will likely have more than five covered employees.... Determine covered employees -- once a covered employee, always a covered employee.... Compile remuneration for covered employee status and the annual $1 million limit.... Calculate potential parachute payments.... Determine when tax is payable.... Create term sheets and termination scenarios.... Consider fiscal year tax-exempt organization remuneration special rules.... Begin long-term planning." (Willis Towers Watson)
State and Local Taxes: Nonqualified Plans Can Help Protect Retirement
"Some states ... attempt to tax nonresidents on this income on the basis that it was earned, or had its source, in the first state. Retirement income has always been a key target of this type of state taxation. Under the federal 'Source Tax Law,' however, retirement income meeting certain conditions will be taxable only by the recipient's state of residence at the time of payment, regardless of its 'source'.... The Source Tax Law ... covers retirement income paid from tax-favored vehicles such as tax-qualified retirement plans and IRAs. It also protects income from nonqualified deferred compensation arrangements if the income either is paid from a certain type of plan or in substantially equal periodic payments over life or life expectancy or a period of at least ten years." (Fulcrum Partners LLC)
[Guidance Overview] Change-in-Control Consequences on Specified Employee Status Under Code Section 409A
"If a corporate transaction occurs during the applicable 12-month period for which the specified employee group has been set, the successor(s) are required to determine how specified employees will be identified following the transaction during a transition period. [This article] describes the transition rules applicable to several different types of corporate transactions." (Morgan Lewis)
[Guidance Overview] Loophole for State University Coaches Excess Compensation Is a Congressional Fumble
"The 2017 Tax Act enacted ... a new provision imposing a 21% tax on 'applicable tax exempt organizations' ... that pay any of their top five paid employees more than $1 million in annual compensation.... [In] Notice 2019-09, the IRS admitted that the statutory language does not reach public colleges and universities exempt under implied statutory immunity. In fact, the Notice advises that such institutions that have received a determination letter from the IRS recognizing them as exempt under Code section 501(c)(3) may relinquish this status to avoid being subject to the tax." (Murphy Austin)
[Guidance Overview] Tax-Exempt Employers May Owe New Excise Tax for 2018 Tax Year (PDF)
"Although parts of the interim guidance likely will require taxpayers to go through additional administrative hurdles and compliance steps, the notice appears relatively taxpayer-friendly and may even minimize the impact of section 4960." (Groom Law Group, via Tax Notes)
Consider These Executive Pay Issues When Preparing for IPO
"In preparing for an IPO, there are a number of tactical issues, such as drafting plan documents, preparing required disclosures and ensuring plan designs are compliant with applicable securities and tax rules. But there are six critical compensation issues a board must consider in preparation for an IPO on a US-based exchange." (Meridian Compensation Partners, LLC)
An Executive Compensation Primer for the HR Professional
"This article addresses three primary responsibilities of the HR professional: [1] understanding the core elements of a typical key employee compensation package; [2] understanding the primary duties and roles of the HR professional with respect to the design and administration of incentive packages; and [3] being aware of hot topics impacting the provision of executive compensation." (Fisher Phillips)
[Guidance Overview] A Deeper Look at Tax Reform's Evolving New Game Plan for Tax-Exempt Organizations (PDF)
"As a practical matter, tax-exempt organizations will need to watch the payments triggered by an involuntary separation from employment to keep that amount at a multiple of 2.99 or less. Organizations who compensate covered employees at an annual amount that exceeds the $1 million dollar limit will need to budget for the excise tax on the compensation the tax-exempt organization pays the executive above the annual limit. Affected tax-exempt and governmental employers will also need to maintain lists of which individuals are amongst the 'High Five' in each calendar year after December 31, 2016, because the excise tax follows the change to Section 162(m) by adopting a 'once-in-always-in' rule." (M. J. Asensio and Greta E. Cowart, via Bloomberg Tax Management Compensation Planning Journal)
[Guidance Overview] SEC Adopts Final Rules for Disclosure of Hedging Policies
"The new rule will require a public company to disclose whether, and to what extent, it has adopted practices or policies regarding the ability of employees, officers, and directors to engage in certain hedging transactions with respect to the company's equity securities." (Cadwalader, Wickersham & Taft LLP)
A Beginner's Guide to Deferred Compensation
"For employees who do elect to participate in a deferred compensation plan there are two important choices to make -- when to take distributions and how to take them.... In most cases, these elections are difficult to change and require a five-year waiting period if changes are allowed under IRS rules governing deferred compensation plans." (Voya)
[Guidance Overview] How Non-Profit Organizations Can Plan for the Executive Comp Excise Tax
"While the code section is simply written, the guidance takes into account the code and regulations that have been established in the compensation area. These can be complex and lead to more questions than answers. The guidance centers around defining each element of Section 4960 and provides answers to some common questions." (Moss Adams LLP)
Winning Say-on-Pay: Top Ten Executive Comp Proxy Tips For 2019
"Companies should [1] clearly set forth the relationship between pay results and actual financial and total shareholder return (TSR) performance.... [2] tell a good story on why their compensation programs benefit shareholders and disclose performance goals and results in a manner that is succinct and easy to follow.... [3] consider litigation trends surrounding non-employee director compensation and changes to 162(m)." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Unexpected Effect of Section 4960 Excise Tax (PDF)
"New Code Section 4960 imposes a 21% tax on excess compensation (over $1,000,000) paid to the current and former top-5 paid employees of tax-exempt organizations.... Under initial IRS guidance, however, the additional tax could ensnare corporations (public and private) and plan sponsors." (Ivins, Phillips & Barker)
[Guidance Overview] IRS Issues Guidance on New Excise Tax on Excess Compensation Paid by Not-for-Profit Entities
"The [JCT] Explanation indicates that Congress intended to apply the excise tax to state colleges and universities (and thus highly paid athletic directors and coaches), but a technical correction may be necessary to reflect this intent. Notice 2019-09 does not make this assumption.... The same rules that apply in determining a related entity for reporting on Form 990 apply here.... While remuneration from the related entities is aggregated, each tax-exempt entity in a control group has its own covered employees." (Buck)
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