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News Items, by Subject

Stock plans - misc

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[Guidance Overview] SEC Solicits Comment on Modernizing Rules Related to Compensatory Securities Offerings and Sales
"The Concept Release solicits comments on questions relating to: [1] 'Gig economy' relationships, or new types of contractual relationships between companies and individuals involving alternative work arrangements, to better understand how they work and determine what attributes of these relationships potentially may provide a basis for extending eligibility for the Rule 701 exemption. [2] Whether the SEC should further revise the disclosure content and timing requirements of Rule 701(e). [3] Whether the use of Form S-8 to register the offering of securities pursuant to employee benefit plans should be further streamlined." (Thomson Reuters Practical Law)
[Official Guidance] Text of SEC Concept Release and Request for Comment on Compensatory Securities Offerings and Sales (PDF)
"Since Rule 701 and Form S-8 were last amended, forms of equity compensation have continued to evolve and new types of contractual relationships between companies and the individuals who work for them have emerged. In light of these developments ... we believe this is an appropriate time to revisit the Commission's regulatory regime for compensatory securities transactions. We therefore solicit comment on possible ways to update the requirements of Rule 701 and Form S-8, consistent with investor protection. We also solicit comment on what effects any revised rule or form may have on a company's decision to become a reporting company." (U.S. Securities and Exchange Commission [SEC])
SEC Provides Disclosure Relief, Considers Employee Stock Purchase Rules
"The SEC voted ... to provide disclosure relief for certain securities offerings related to employee compensation, and to seek public comment on ways to modernize its rules for employee stock compensation. Rules adopted [July 18] raised the threshold for the aggregate sales price or amount of securities sold in compensatory arrangements that require an issuer to deliver additional disclosures to investors ... from $5 million to $10 million for any 12-month period." (Journal of Accountancy)
SEC Eyes Equity Compensation Changes for 'Gig Workers'
"The SEC solicited public comment on potential changes to the regulator's treatment of equity compensation, tied to the emergence of the 'gig economy.'... Explaining the thinking behind its call for commentary, SEC highlights that equity compensation can be an important component of the employment relationship." (planadviser)
A Key Threshold Is Increased for Private Company Equity Compensation
"Many private companies restrict their equity compensation grants so as to stay within [the SEC Rule 701] $5 million limit and thereby avoid the requirement to disclose confidential financial and other information about the company, even if that means offering less equity to employees than the owners might otherwise like to provide.... Section 507 of the [Economic Growth, Regulatory Relief, and Consumer Protection Act, signed into law on May 24,] directs the SEC to revise Rule 701(e) within 60 days of enactment to increase this amount to $10 million and thereafter to index it for inflation every five years[.]" (Willis Towers Watson)
A Stock Plan Is Not Necessarily an ERISA Plan
"[The Second Circuit] essentially held that, when the primary purpose of a stock ownership plan was something other than deferring income or providing retirement income, ERISA may not govern. Though the Court asserted that the distinction between a pension plan and one that offered present benefits was 'crisp and unambiguous,' one might be forgiven for harboring doubt that the line is as well-defined as the Court believed.... [T]he Second Circuit adopted the rationale that sometimes the statute should not be construed literally, and it read 'primary purpose' into the definition of employee pension benefit plan." [Pasternack v. Shrader, No.16-217 (2d Cir. July 13, 2017)] (Robinson & Cole LLP)
New Tax Law Provides Tax Deferral Opportunity for Certain Private Company Equity Grants
"[New] Code Section 83(i) ... will allow certain private company employees to defer federal income tax on eligible stock options and restricted stock units for up to five years following their respective exercise or settlement.... Section 83(i) could be useful for bridging the gap between when an employee is subject to income tax and when the employee's shares can be liquidated." (Morgan Lewis)
A New Year, A New Stock Plan (PDF)
"The items listed [in this article] reflect recent changes in applicable corporate governance, securities, tax, and accounting rules.... [It] is usually preferable to seek shareholder approval for a new plan that covers the entire spectrum of desired improvements, globalization of the workforce, e-delivery innovations, and governance practices responsive to the concerns of shareholders and the standards enunciated by proxy advisory firms such as ISS and Glass Lewis." (The Wagner Law Group, via Bloomberg BNA Pension & Benefits Daily)
Survey Results: Equity Compensation Plan Participants (PDF)
18 pages. "For one-third of employees, equity compensation was the main reason, or one of the main reasons, they accepted their current job ... Just one-quarter of employees have exercised or sold any of their equity compensation/ESPP ... Employees are, on average, 63% vested in their equity compensation ... Millennials are most confident in making decisions about their equity comp/ESPP, but are less likely than other generations to see it as part of their long-term financial plan ... Two-thirds of employees who are offered a workplace financial wellness program take advantage of it ... In addition to help with equity comp, employees are looking for help with retirement planning and wealth-building." (Charles Schwab)
[Guidance Overview] Annual Reporting Requirements for Incentive Stock Options and Employee Stock Purchase Plans
"[A] separate Form 3921 or Form 3922 [must] be filed with the IRS for each transaction ... even if one participant has multiple transactions during the year. If a company provides participants with an information statement that meets the substitute statement requirements, ... the company may aggregate transactions and provide only one substitute statement to each participant who had multiple transactions during the year." (Orrick)
[Guidance Overview] 2018 Deadlines Approach to Furnish ISO and ESPP Information Statements and Returns
"[A] corporation [must] furnish a written statement to any employee or former employee who either [1] exercised an incentive stock option (ISO) ... during 2017 or [2] during 2017 first transferred legal title to shares acquired under the corporation's employee stock purchase plan (ESPP).... The corporation must furnish these statements on Forms 3921 and 3922 no later than January 31, 2018.... [C]orporations [also] must file returns with the [IRS] on Forms 3921 and 3922 no later than February 28, 2018, if filed on paper, or April 2, 2018, if filed electronically." (DLA Piper)
[Guidance Overview] New Code Section 83(i): Qualified Equity Grant Programs Permit Employees to Elect to Defer Income Taxes on Stock Options or RSUs (PDF)
"[W]hen an employee vests in a qualified equity grant, the employee can elect to defer for up to five years the income taxes that otherwise would be due on the date the stock vests or is transferred to the employee.... [W]hen an employee makes a Code section 83(i) deferral election, the 'deferral stock' begins its holding period for long-term capital gain tax treatment on the date the qualified stock is transferred to the employee, even though the employee will not pay taxes on the value of the qualified stock for up to five years." (Trucker Huss)
Deadlines Approach for Employer Reporting of 2017 ISO and ESPP Transactions
"The deadline for furnishing Copy B of Forms 3921 and 3922 to the employee or former employee for ISO exercises or ESPP shares purchased during 2017 is January 31, 2018. The deadline for filing Copy A of Forms 3921 and 3922 with the IRS depends on whether the returns are required to be filed electronically or manually.... These reporting obligations are in addition to any reporting obligations that arise upon the disqualifying disposition of shares acquired under either an ISO or an ESPP or upon the exercise of an option that does not qualify as an ISO." (Latham & Watkins)
Tax Reporting for Stock Comp: Understanding Form W-2, Form 3922, and Form 3921
"For employees with stock compensation, tax-return paperwork and the information it contains can be confusing and hard to decipher. This [article] provides an overview of the reporting you need to understand." (
Does Equity Compensation Count as Wages Under Federal and California Law?
"Many starts-ups -- particularly those that are initially cash-poor -- consider offering new hires equity in the business, either in lieu of or in addition to wages. While this approach would seem to solve the recruiting problem, it can lead to legal trouble. In fact, payment of employees through stock or stock options can violate both federal and California wage and hour laws.... [T]he issue is fairly complex." (Littler)
Year-End Checklist of Items to Review, Know, and Consider About Your Stock Compensation
"As 2017 draws to its close, the new tax-reform law is getting a lot of attention, and it will certainly affect tax rates in the future ... [D]on't forget the fundamentals of year-end planning. [This checklist] summarizes what you need for comprehensive year-end financial and tax planning with stock compensation." (
[Guidance Overview] ISS Issues 2018 Final Policy Updates and Additional Guidance on Pay-for-Performance Assessment and Equity Plan Evaluations
"The policy updates and guidance revise ISS proxy voting policies and methodologies for U.S.-listed companies in the following areas relating to executive compensation ... [1] ISS quantitative pay-for-performance assessment, [2] ISS Equity Plan Scorecard evaluation, [3] Evaluation of non-employee director compensation, [4] Problematic pledging of company stock, [5] Lack of (i) Say on Pay or (ii) Say on Pay Frequency ballot items, [6] Board responsiveness to low shareholder support on a Say on Pay proposal." (Meridian Compensation Partners, LLC)
[Official Guidance] Text of Instructions for IRS Forms 3921 and 3922: Exercise of an Incentive Stock Option Under Section 422(b) and Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c) (PDF)
Rev. Oct. 2017. "Every corporation which in any calendar year transfers to any person a share of stock pursuant to that person's exercise of an incentive stock option described in section 422(b) must, for that calendar year, file Form 3921 for each transfer made during that year.... Every corporation, which in any calendar year records, or has by its agent recorded, a transfer of the legal title of a share of stock acquired by the transferor (person who acquires the shares pursuant to the exercise of the option) pursuant to the transferor's exercise of an option granted under an employee stock purchase plan and described in section 423(c) (where the exercise price is less than 100% of the value of the stock on the date of grant, or is not fixed or determinable on the date of grant), must, for that calendar year, file Form 3922 for each transfer made during that year." (Internal Revenue Service [IRS])
[Guidance Overview] Amendment to Maryland 'Blue Sky' Law Removes Filing Requirement for Many Private Employers Granting Equity Awards to Employees
"Effective October 1, 2017, Section 11-601(11) has been revised to provide for a self-executing exemption (no filing required) in connection with an investment contract or other security issued in connection with a benefit plan if no commission or other remuneration is paid in connection with the offering and [1] the plan is qualified under the Internal Revenue Code, [2] the plan complies with Rule 701, or [3] the security is effectively registered and sold under the Securities Act of 1933." (Baker McKenzie)
The Trump/GOP Tax Reform Framework: What It Means for Stock Compensation
"[T]he proposed changes that are likely to have an indirect impact on stock compensation include: simplification of individual income tax rates; elimination of the AMT; [and] elimination of the estate tax. Notably, the framework proposes to give Congress the prerogative to create a higher top income tax rate for the wealthiest individuals, in addition to the three tax rates presented. That would almost certainly apply to executives with stock compensation." (
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." (
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)
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." (
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)
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." (
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." (
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." (
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." (
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[.]" (
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." (
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." (
[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." (
[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." (
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." (
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." (
[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." (
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." (
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)
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