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Benefits in the News > By Subject >

Stock plans - misc


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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." (myStockOptions.com)
ASU 2017-09 Provides Clarity to Modifications to Share-based Compensation Arrangements
"FASB issued Accounting Standards Update (ASU) 2017-09 to reduce the cost and complexity when applying Topic 718 and standardize the practice of applying Topic 718 to financial reporting. The ASU was not developed to fundamentally change the definition of a modification, but instead to provide guidance for what changes would qualify as a modification. This was done by better defining what does not constitute a modification." (Findley Davies | BPS&M)
Practical Considerations Relating to Share Withholding for Taxes
"[A new FASB rule] permits cash settlement of a share-based award for tax withholding up to the maximum statutory tax rate in the applicable jurisdiction without causing adverse accounting treatment of the equity award. The rule generally became effective for calendar year companies on January 1, 2017. Many companies are now considering implementing increased share withholding for taxes and must consider their existing equity plan provisions and securities law, IRS, and payroll issues." (Morgan Lewis)
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." (myStockOptions.com)
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)
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." (myStockOptions.com)
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)
Exempt Stock Compensation Limits May Increase
"Rule 701 under the Securities Act of 1933 currently provides a mechanism for non-public companies to offer and sell their securities for the purpose of providing compensation to their own employees without the need to register those securities.... [If] the company believes sales under the plan will exceed $5,000,000 in a coming 12-month period, the company must disclose risk factors and certain financial statements to the employee investors. The new legislation would double the $5,000,000 figure to $10,000,000 before a company would have to reveal financial information." (Seyfarth Shaw LLP)
Stock Utilization in U.S. Companies Continues to Decline with the Increased Use of Full-Value Awards
"As U.S. companies continue a decade-long shift away from granting employees stock options toward issuing more full-value (time- or performance-lapsing) shares as part of their long-term incentive (LTI) programs, the number of shares required to deliver the same value to LTI plan participants has declined. At the same time, shareholders have increasingly monitored stock incentive usage at the companies in their portfolios and have taken action in limited cases where share usage exceeds norms via negative votes on LTI plan proposals. As a result, stock usage is at its lowest point in years as companies face continuing pressure to operate their LTI plans within market norms." (Willis Towers Watson)
Stock Compensation Would Be Affected by the Repeal and Replacement of Obamacare
"The AHCA seeks to eliminate most of the taxes introduced by the ACA, including the net investment income tax on capital gains, dividends, and interest (also known as the 3.8% surtax) and the additional Medicare tax (0.9%) on wages.... While it is paid with a taxpayer's annual tax return rather than by income withholding, the ACA's 3.8% surtax on investment income also can be triggered by stock compensation." (myStockOptions.com)
10 Ways Stock Compensation Can Make You Happier
"[1] Wealth creation ... [2] A sense of anticipation ... [3] A feeling of being special ... [4] ESPP participation and discount ... [5] Control over when you receive income and pay taxes ... [6] Donations and gifts of company stock ... [7] Being an owner in your company ... [8] New friends ... [9] Feelings of financial security ... [10] Mindfulness and meaningfulness." (myStockOptions.com)
Another Federal Court Affirms Enforceability of Restrictive Covenants in Electronically Delivered Equity Award Agreements
"The court easily rejected plaintiffs' argument that they had never checked a box stating they 'agreed to' or 'accepted or acknowledged' the terms of the agreements. The court observed that they had checked a box affirming that they 'read' the documents, and the documents explicitly advised them that the non-competes were a condition of accepting the stock award. The court also found the plaintiffs' contention that they did not recall reading the documents, irrelevant." [ADP, LLC v. Lynch, Nos. 16-3617, 16-01111 (3d Cir. Jan 17, 2017; not precedential)] (Winston & Strawn LLP)
Tax Season 2017: A Quick Take on What's New for Stock Comp
"In general, 2016 brought no major tax changes to consider.... However, developments over the past few years, such as changes in tax rates or amounts that are indexed yearly for inflation, continue to affect tax-return reporting.... The 2016 version of IRS Form 1099-B, which brokers issue for stock sales made during the tax year, closely resembles the version for the 2015 tax year. However, the 2014 version introduced some major changes that you should continue to keep in mind[.]" (myStockOptions.com)
The 'Average' Non-Qualified Defined Contribution Plan (PDF)
"[A] recent review of 200 medium-to-large company non-qualified defined contribution plan design features ... found: 94 different types of eligibility provisions; 124 different company contribution allocation formulas; 95 plans with unique lineups of mutual funds as investment alternatives with 25 including company stock; 61 different vesting schedules." (NQDCSolutions, LLC)
Tax Reporting for Stock Compensation: Understanding Form W-2, Form 3922, and Form 3921
"Making sense of Form W-2 when stock compensation is reported ... Form 3922 for ESPPs and Form 3921 for ISOs ... Sell shares in 2016? The fun is just beginning." (myStockOptions.com)
Employee Stock Plans: 2016 Year-End International Reporting Requirements
"This White Paper highlights some of the principal calendar and year-end reporting requirements for employee stock plans that U.S. companies most commonly encounter when offering these programs to their employees in selected jurisdictions worldwide.... A chart summarizing these items [is included]." (Jones Day)
[Guidance Overview] That's a FAQ, Jack! New Interpretations from ISS
"On December 19, 2016, ISS issued updates to several of its key FAQs, including those on Equity Compensation Plans, Executive Compensation Policies, and also the explanation of ISS' Pay-for-Performance Mechanics. [This article summarizes] the specific updates under each FAQ and the P4P Mechanics." (EdwardHauder.com)
[Guidance Overview] 2017 Deadlines Approach to Furnish ISO and Employee Stock Purchase Plan Information Statements and Returns
"Section 6039 of the Internal Revenue Code requires a corporation to furnish a written statement to any employee or former employee who either [1] exercised an incentive stock option within the meaning of Section 422 of the Code (ISO) during 2016 or [2] during 2016 first transferred legal title to shares acquired under the corporation's employee stock purchase plan within the meaning of Section 423 of the Code (ESPP). This requirement applies to both privately held and publicly traded corporations. The corporation must furnish these statements on Forms 3921 and 3922 no later than January 31, 2017." (DLA Piper)
Analysis of New Stock-Based Compensation Rules
"[A recent FASB] update provides private companies, when granting stock to employees, with a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. In contemplating whether to make such an election, companies should be mindful that not all valuation methodologies are created equal.... [C]hoosing any of the various methods for allocating such values can have a major impact on a company's share price." (CFO)
Ho, Ho ... How? A Guide to Making Year-End Donations of Company Stock to Charities
"For a charitable donation of company stock acquired from equity compensation, the tax treatment is the same as it is for donations of any stock to a qualified charity.... With a charitable gift of appreciated shares held long-term, the donation you make and the deduction you get are greater than they would be if you were to instead sell the shares and donate the cash proceeds. This is because when you donate shares, you avoid paying the capital gains tax." (myStockOptions.com)
[Guidance Overview] Maximum Tax Withholding and Liberal Share Counting: A Deadly Combination
"ISS issued its new FAQs regarding equity compensation plans [in a document dated Dec. 16, 2016]. FAQ #32 deals with the issue of withholding at the maximum tax rate coupled with liberal share counting which permits shares withheld to be added back to the plan's share authorization." (EdwardHauder.com)
Stock Plan Education: Survey Shows Where Employees Need the Most Help
"Most stock plan participants like their equity compensation and say it enhances their commitment to their companies. About 40% of the respondents say that stock comp would be a factor in deciding whether to stay in their current job or take a job with a different company.... [P]articipants need well-rounded general financial education, not just communications about the specifics of their grants." (myStockOptions.com)
Using Phantom Stock in a Family-Owned Business
"A phantom stock plan is one way for family-owned businesses to provide long-term incentive compensation to key employees without actually issuing stock. Phantom stock is a way to give key employees the economic benefit of owning stock without requiring family members to give up any equity in the business." (Bradley Arant Boult Cummings LLP)
Company Stock Plans Are a Valued Benefit, But Risks Should Be Understood
"16 percent of employees say company stock is their most important employer-provided benefit, up from 10 percent in 2014.... Almost two-thirds of employees (63 percent) said that participating in their company stock plan gives them a sense of ownership of the company, and 53 percent said it makes them feel more loyal to their employer. Nearly half of employees (49 percent) said that a company stock plan is an important factor when considering a new job." (Society for Human Resource Management [SHRM])
Growing Number of Employees Rank a Company Stock Plan as Their Top Workplace Benefit
"16 percent of employees say company stock is their most important benefit, up from 10 percent in 2014.... Almost two-thirds of employees (63 percent) said that participating in their company stock plan gives them a sense of ownership of the company, and 53 percent said it makes them feel more loyal to their employer. Nearly half of employees (49 percent) said that a company stock plan was an important factor when considering a new job." (Fidelity)
[Guidance Overview] NYSE Clarifies Position That Amendment of Equity Incentive Plan to Allow Maximum Tax Withholding Is Not a Material Amendment
"[T]he NYSE has posted revised equity compensation FAQs on its website. Among the amendments is one to Question C-1, which clarifies that an amendment to allow the maximum tax withholding is not a material amendment. The same is true if forfeited but unissued shares are recycled back into the plan. If restricted shares that have been issued are recycled back into the plan, it is not a material amendment ONLY if those shares are forfeited rather than vesting." (Winston & Strawn LLP)
Stock Compensation: 2016 Assumption and Disclosure Study (PDF)
36 pages. "This study presents [an] analysis of the 2015 calendar year-end assumptions and disclosures separately for large, non-high tech US public companies and for high tech US public companies." (PricewaterhouseCoopers)
Equity Compensation Trend: Extending the Time to Exercise Vested Stock Options
"Providing an extended period to exercise vested stock options is not a new idea. In the past, employers have considered this approach, typically on a case-by-case basis, if the employee was in good standing and unique circumstances were present upon termination or if the employee has some degree of leverage in negotiating his or her departure. What is new is the trending consideration to provide an extended post-termination exercise period to employee option holders generally." (DLA Piper)
Stock Options In Startup Companies Could Become More Popular Than Ever Under Proposed Tax Code Change
"[R]ecently proposed bipartisan legislation could provide a new optional tax treatment (pun intended) and make stock options more appealing than ever at startups and other pre-IPO companies.... [T]he Empowering Employees Through Stock Ownership Act seeks to give employees in privately held companies extra time to pay taxes on the income they recognize at exercise.... Instead of paying taxes at exercise with nonqualified options (or at RSU vesting when settled in stock), this legislation would allow tax deferral for up to seven years." (myStockOptions.com)
[Guidance Overview] New 409A Regs, Part 2: On Taking (and Giving) Stock
"Sometimes in a transaction, employees with stock awards are given rights to get paid on the same terms as shareholders. For awards subject to 409A, the rules generally permit this as long as the payments do not go beyond five years from the date of the change in control. However, since options and SARs with fair market value strike prices are exempt from 409A, there was some question as to whether this rule could be used with those awards. These proposed regulations confirm that it can.... [U]nder Section 338 of the Code, parties can elect to treat a stock sale as a deemed asset sale for tax purposes. Does this include 409A, which would then allow them to choose whether a separation from service has occurred? The proposed regulations say it does not. Therefore, employees will not have a separation from service, even if a 338 election is made." (Benefits Bryan Cave)
[Guidance Overview] IRS Clarifies and Modifies Code Section 409A Guidance
"[T]he IRS also provided helpful guidance regarding the correction of certain non-compliant deferred compensation arrangements. Specifically, to the extent an amount of deferred compensation is not vested (and will not become vested during the current year), an employer or other service recipient may amend a noncompliant term or provision in the written deferred compensation document in a manner permitted under IRS correction guidance that would otherwise apply to vested amounts, even though the noncompliant term or provision may not have been eligible for correction under that guidance." (Bond, Schoeneck & King)
[Guidance Overview] Key Takeaways from the Newly Issued Proposed Section 409A Regs
"Exempt stock rights (stock options and stock appreciation rights) can be awarded to service providers who are expected to commence work for the service recipient within 12 months, if they actually do commence work within that period.... Liberal timing rules apply to payments triggered by the service provider's death.... 'Clawbacks' on exempt stock rights are permitted.... A payment can qualify as a 'short-term deferral' even if the payment is made after March 15 of the year following vesting, where the payment is prohibited by federal securities law restrictions." (Wilkins Finston Friedman Law Group LLP)
[Guidance Overview] Proposed Section 409A Regs Make Several Notable Changes
"Though the IRS emphasized that the proposed regulations make narrow, discrete clarifications and changes to the final and 2008 proposed regulations, ... changes to four areas ... are likely to have a greater impact on the design and operation of deferred compensation plans. [1] You can still 'fix' noncompliant arrangements the year before vesting.... [2] Changes to stock option/SAR Rules.... [3] Employee-Independent Contractor.... [4] Payment events triggered by beneficiaries." (Miller & Chevalier)
[Guidance Overview] Section 409A Proposed Regs: IRS Changes Affect Nonqualified Deferred Comp and Stock Plans
"[T]hese proposals formalize previously informal guidance that the IRS has been providing, offer new flexibility in some areas, and set forth a few new requirements. The IRS is allowing reliance on this guidance now and will not assert any position that runs counter to it. The proposed regulations present a lengthy list of items." (myStockOptions.com)
Linkedin, Microsoft and 'Stock-Based Compensation'
"Silicon Valley Pre and Post-IPO companies used stock options almost exclusively until the last six or seven years.... LinkedIn was an early and enthusiastic member of the companies who moved to RSUs.... If LinkedIn had used exclusively stock options over the past 3 years, most of those options would have little or no readily ascertainable value in the Microsoft transaction. This would have been demotivational for LinkedIn staff and executives. It would have also been costly to Microsoft[.]" (Performensation)
Broad-Based Stock Grants and Employee Ownership Are Expanding
"[B]road-based grants of equity awards to all [employees] ... show that stock compensation and share ownership are not just for executives and directors but are also practical, commonsense ways in which companies can reward rank-and-file employees above and beyond salary and encourage a commitment to workplace excellence through a culture of employee ownership. From an economic perspective, corporate profit-sharing through stock options and restricted stock/RSUs has the potential to reduce income inequality by giving employees potentially substantial investment upside via the familiar, trustworthy channel of their own companies." (myStockOptions.com)
What's Equity Compensation Really Worth to Your Employees?
"What is equity compensation REALLY worth? How do you know how much to give? How do your employees know how much they are getting? What truly drives, impacts, reduces and magnifies this value? ... [This article addresses] valuations, taxation, restrictions, dilution, perceptions and competition ... the shapers of equity value that are seldom discussed." (Performensation)
[Guidance Overview] FASB Updates Accounting Standards for Stock-Based Awards
"Among other changes, the updated standards permit employers to withhold stock for tax purposes upon settlement of stock-based awards -- such as stock options and RSUs -- at up to the maximum individual statutory tax rate without triggering adverse accounting consequences." (Wilson Sonsini Goodrich & Rosati)
[Guidance Overview] Can You Amend Your Stock Plan to Allow Tax Withholding Up to the Maximum Statutory Rate?
"[A] company could not apply an amendment to allow tax withholding up to the maximum statutory rate unless it applies the change to future accounting for tax deductions attributable to current equity awards and other ASU 2016-09 changes. Companies should double-check with their auditors as to when these amendments should be adopted and applied." (Winston & Strawn LLP)
Can You Amend Your Stock Plan to Allow Tax Withholding Up to the Maximum Statutory Rate?
"[B]oth the NYSE and NASDAQ require shareholder approval of a material amendment of a plan that provides for stock awards to directors or executives.... From the perspective of the NYSE and NASDAQ, if the Stock Plan allows the recycling of shares surrendered or withheld to pay tax withholding (that is, puts those shares back in the authorized share pool and allows those shares to be re-used for future awards), then an amendment of that Plan that allows for tax withholding at the maximum rate instead of the minimum rate would be material because it will increase the number of shares available for issuance under the Plan!" (Winston & Strawn LLP)
[Guidance Overview] FASB Simplifies Accounting Rules for Stock-Based Compensation
"Current accounting standards provide that an equity award will qualify for equity classification (i.e., resulting in fixed accounting treatment) if the fair market value of shares withheld to cover an employer's withholding obligations upon settlement of the award do not exceed the minimum statutory withholding requirement. If an equity plan permits share withholding in excess of this withholding requirement, equity awards granted under the plan currently would be subject to mark-to-fair value accounting (i.e., variable accounting).... Under the Amendment, an equity plan may now allow share withholding up to the maximum statutory withholding requirement while still avoiding variable accounting." (Meridian Compensation Partners, LLC)
[Guidance Overview] New FASB Rules on Equity Compensation Withholding: Issues
"Most equity compensation plans have the minimum statutory tax rate withholding requirement 'hardwired' into the plan, thus requiring a plan amendment to effect this change. Whether such an amendment will require shareholder approval for public companies under NYSE or NASDAQ rules is unclear, however, previous interpretive guidance suggests that shareholder approval may not be required ... Company officers and directors subject to section 16 under the Securities Exchange Act would not appear to experience an issue with the adoption of an increased withholding rate for tax purposes." (Morgan Lewis)
[Guidance Overview] New FASB Rules on Equity Compensation Withholding
"The new standard permits equity classification for partial cash settlement of a share-based award for tax withholding up to the maximum statutory tax rate in the applicable jurisdictions. Although withholding typically is mandatory in most jurisdictions, the new standard appears to provide companies with greater flexibility, for financial accounting purposes, to address the preferences of the award recipients with regard to the amount to be withheld." (Morgan Lewis)
For Stock-Based Pay, HR Can Help with Next Year's Taxes
"Employees should be saving confirmation statements and any other substitute statements provided by their stock plan provider or employer.... Double-counting restricted stock income is one of the most common mistakes employees make today, simply because current Form 1099-Bs don't account for taxes potentially withheld already. Keeping track of additional documentation, such as previous confirmation statements, can help ensure employees don't pay taxes on amounts paid in the previous year." (Society for Human Resource Management [SHRM])
[Guidance Overview] FASB Issues Accounting Standards Update on Employee Share-Based Payment Accounting Improvements (PDF)
"[E]arly adoption of ASU 2016-09 is permitted in any interim or annual period for which financial statements have not been issued, but companies must adopt all of the guidance in the same period. For example, if a company wishes to early adopt to take advantage of the more favorable stock-for-tax withholding provisions, it must also early adopt all other provisions of the ASU including the potentially volatile income tax provisions[.]" (Frederic W. Cook & Co., Inc.)
[Guidance Overview] FASB Changes the Accounting Rules for Equity Compensation
"ASC 718 will now allow companies to withhold shares for taxes up to the maximum individual tax rate in the applicable jurisdiction rather than the minimum statutory withholding amount.... [C]urrently, to avoid triggering liability accounting treatment, any shares withheld to cover the taxes due at settlement of an option or award must be limited to the minimum required statutory withholding of the award holder. Most companies and their counsel have hardwired the minimum required statutory tax-withholding requirement into their stock plan documents." (Winston & Strawn LLP)
FASB Issues Standard to Simplify Share-Based Payment Accounting
"In addition to rules that affect all organizations that issue share-based payments, the ASU contains provisions that simplify two areas specific to private companies:... [1] [P]rivate companies will be able to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics. [2] Private companies will be able to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value." (Journal of Accountancy)
[Official Guidance] Text of FASB Update 2016-09: Stock Compensation (Topic 718) -- Improvements to Employee Share-Based Payment Accounting
127 pages. "The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities." (Financial Accounting Standards Board [FASB])
[Opinion] Compensating Executives in a 'Challenging' World
"ConocoPhillips shareholders are asking that the Compensation Committee develop a program to determine which portions of a bonus should be paid immediately, which portions should be deferred, and what adjustments should be made to those deferrals based on performance.... [It's] a bit of a nightmare for people who need to figure out how to make such a plan 409A-compliant and for those who need to administer FICA tax payments.... More than ever, the Compensation Discussion and Analysis (CD&A) will be very key. Explaining why the mix of objective and subjective factors was chosen can go a long way to appeasing large shareholders." (Benefits and Compensation with John Lowell)
Text of Fourth Circuit Opinion in Marriott 'Top Hat' Case, Dismissing Claim Due to Statute of Limitations (PDF)
"[We] agree with the parties that Maryland's three year statute of limitations for contract actions applies. However ... the question of when the statute begins to run is a matter of federal law.... While the 'formal denial' rule is generally applied in ERISA cases, we [have] recognized ... that in limited circumstances the rule is impractical to use.... [T]he 1978 Prospectus -- in a section entitled 'ERISA' -- plainly stated that the Retirement Awards did not need to comply with ERISA's vesting requirements.... The Appellants then waited more than 30 years to file suit, alleging that the Plan violates ERISA's vesting requirements." [Bond v. Marriott Int'l Inc., No. 15-1160 (4th Cir. Jan. 29, 2016)] (U.S. Court of Appeals for the Fourth Circuit)
[Opinion] Expect Reported CEO Compensation to be Lower for 2015
"CEO compensation for 2015 generally will be down from 2014.... Pension discount rates have risen. Equity markets generally did not perform well.... Did the economic conditions in 2014 that resulted in extremely large reported CEO compensation meant that CEOs were overpaid in 2014 compared to other years. And, similarly, were those same CEOs underpaid in 2015 compared to 2014?" (Benefits and Compensation with John Lowell)
Employee Stock Plans: Year-End 2015 International Reporting Requirements
"This Commentary highlights some of the principal calendar and year-end reporting requirements for employee stock plans that U.S. companies most commonly encounter when offering these programs to their employees in selected jurisdictions worldwide. Please note that this Commentary does not address routine, year-end tax reporting obligations. A chart summarizing these items [is included]." (Jones Day)
Tax Reporting for Stock Compensation: Understanding Form W-2, Form 3922, and Form 3921
"The vesting of restricted stock, the share delivery from restricted stock units (RSUs), and the vesting of performance shares all prompt W-2 reporting of the income received. The treatment on the W-2 is essentially the same for all three grant types.... If you exercised nonqualified stock options last year, the income you recognized at exercise will be reported on your W-2.... The W-2 reporting for ESPP income depends on whether your company's ESPP is tax-qualified or not and, if it is tax-qualified, how long you hold the shares.... If you sold shares from stock compensation or an ESPP last year, you will need guidance to report the sale proceeds on your tax return." (myStockOptions.com)
[Guidance Overview] Another Suggested Stock Incentive Plan Revision for 2016
"[C]urrently, to avoid triggering liability treatment, any shares withheld to cover the taxes due at settlement of an option or award must be limited to the minimum required statutory withholding of the award holder. [FASB recently] affirmed its decision to broaden this provision to allow shares to be withheld for taxes up to the maximum individual tax rate in the applicable jurisdiction.... [Most] companies ... have hardwired the minimum required statutory tax-withholding requirement into their stock plan documents. Given the liberalization of this requirement, however, most companies (and many executives) will want to preserve the flexibility to withhold taxes at a higher rate in some circumstances." (Winston & Strawn LLP)
[Guidance Overview] Annual ISO and ESPP Information and Reporting Requirements
"Participant statements may be provided on Form 3921 (for ISOs) and Form 3922 (for ESPPs) or may be provided using a different format that complies with the substitute form requirements found in IRS Publication 1179.... [C]ompanies with a limited number of transactions will likely use Forms 3921 and/or 3922 (as opposed to substitute statements) since these forms will need to be prepared and submitted to the IRS in any event.... [C]ompanies that provide Form 3921 and/or 3922 to participants (again, as opposed to providing substitute statements) will deliver the form(s) to their participants, along with a cover letter explaining the statement in a manner similar to this statement for ISO transactions and this statement for ESPP transactions." (Orrick)
[Guidance Overview] 2016 Deadlines Approach to Furnish Incentive Stock Option and Employee Stock Purchase Plan Information Statements and Returns
"Section 6039 of the Internal Revenue Code requires a corporation to furnish a written statement to any employee or former employee who either [1] exercised an incentive stock option within the meaning of Section 422 of the Code (ISO) during 2015 or [2] during 2015 first transferred legal title to shares acquired under the corporation's employee stock purchase plan.... The corporation must furnish these statements on Forms 3921 and 3922 no later than February 1, 2016.... [C]orporations must [also] file returns with the Internal Revenue Service on Forms 3921 and 3922 no later than February 29, 2016, if filed on paper, or March 31, 2016, if filed electronically." (DLA Piper)
Discourage Costly Stockholder Derivative Lawsuits by Obtaining Stockholder Ratification of Reasonable Limits on Non-Employee Director Equity and Cash Compensation
"If the company places a per person limit on the compensation that can be granted, the company can have discretion to select from a range of pre-approved stockholder performance standards that must be re-approved by stockholders every five years. For this reason, most public companies have a per person limit on the performance-based awards that can be granted under the equity plan.... As [one Delaware court opinion illustrates], just because a corporation's existing equity plans contain certain stockholder-approved grant limits, that does not mean that those limits will be 'meaningful' limits on non-employee director compensation under Delaware law." [Calma v. Templeton, No. 9579-CB (Del. Ch. Apr. 30, 2015)] (Trucker Huss)
Are Your Retirement Vesting Provisions Motivating the Wrong Behaviors?
"As more executives near retirement age, many banks are realizing their equity vesting provisions may be motivating unintended behaviors. Do your bank's retirement provisions encourage executives to: Provide advance notice of retirement to facilitate planned succession? Assist in their transition? Remain engaged and motivated through the last day on the job? Remain interested in the bank's success following retirement? Unfortunately, many retirement provisions don't consider these important objectives and in some cases motivate the opposite behaviors." (Meridian Compensation Partners, LLC)
ISS's Equity Plan Scorecard: A New Era in Public Company Equity Compensation Plans (PDF)
8 pages. "[The ISS Equity Plan Scorecard] is predicated on detailed guidelines used by ISS when determining if it will recommend that shareholders vote for approval of an equity compensation plan and should be considered by publicly-traded companies when designing or amending their equity compensation plans. The plans subject to the Scorecard include stock option plans, restricted stock plans, omnibus equity plans, and stock-settled stock appreciation rights plans." (Holland & Knight)

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