Loan & Distribution Specialist AimPoint Pension
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Regional Vice President of Sales The Retirement Plan Company
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Defined Benefit Combo Cash Balance Compliance Consultant Loren D. Stark Company (LDSCO)
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AimPoint Pension
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Compass
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Bates & Company, Inc.
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Trends in Change in Control Benefits
Alvarez & Marsal Mar. 21, 2024 "Average change in control payments remain substantial, averaging ~$23.1M for CEOs and ~$7.5M for CFOs. The most common cash severance multiple in connection with a change in control is between 1.99 and 2.99 times compensation (60% for CEOs and 42% for CFOs). The prevalence of double trigger vesting for equity awards remains high, utilized by 88% of companies. Accelerated vesting of equity awards continues to be the most substantial CIC payment, representing, on average, 63% and 58% of the CIC payments for CEOs and CFOs, respectively." Tags: Executive comp |
SEC Pay Versus Performance Updates
Seyfarth [Guidance Overview] Mar. 18, 2024 "The PVP disclosure rules require public reporting companies to disclose (for fiscal years ending on or after December 16, 2022) the relationship between executive compensation actually paid and the companies' financial performance. To assist companies in navigating these rules, the SEC has issued a series of CD&Is. This blog post summarizes the most recently issued/updated PVP CD&Is published by the SEC on November 21, 2023." Tags: Executive comp |
Expose Your Executive Pay Plan's Clawback Vulnerabilities
Willis Towers Watson Mar. 7, 2024 "Now that they are mandatory, it may be tempting to assume that identifying which parts of your executive compensation plan are vulnerable to clawbacks will be a straightforward endeavor. However, you may be surprised by the places where executive pay elements are hidden among other plan documents and written communications. [This article provides a] list of places where clawback triggers may be hiding to avoid being caught off-guard in the event of a restatement." Tags: Executive comp |
Steps for Executing Clawbacks After Your Restatement
Willis Towers Watson Mar. 7, 2024 "[1] Make key process decisions up front ... [2] Perform the calculations ... [3] Determine the source of clawback funds ... [4] Document calculations and processes." Tags: Executive comp |
How Companies Will Claw Back Executive Incentive Compensation
Willis Towers Watson Mar. 7, 2024 "Determining the source of funds to execute a clawback for current employees is straightforward: A ready source of funds exists based on future pay. The [SEC] has said that, after a restatement, companies must act 'reasonably promptly' to recoup funds, and that directors and officers who are charged with safeguarding the company's assets will pursue the most appropriate balance of cost and speed when deciding the right way to recover funds." Tags: Executive comp |
Crafting Compliant Executive Compensation: How Tax-Exempt Entities Can Avoid Excess Benefit Transactions (PDF)
Shipman [Guidance Overview] Mar. 4, 2024 "Section 4958 prohibits the payment of excessive compensation to certain individuals responsible for leading tax-exempt organizations. Executives who receive these payments ... could be subject to a penalty tax of 25% on the value of the excess benefit, plus additional penalty taxes if the excess benefit is not repaid to the organization.... To whose compensation does Section 4958 apply? ... How may a tax-exempt entity create a rebuttable presumption of reasonableness? ... Once a rebuttable presumption is created, then what?" Tags: Executive comp |
IRS Cracks Down on Aircraft Usage by Corporations and High-Income Earners
McDermott Will & Emery Mar. 4, 2024 "Much of the personal use of corporate aircraft is attributable to travel associated with working remotely and challenges stemming from the COVID-19 pandemic. While the IRS has historically audited corporate aircraft issues ... this is a singularly focused audit initiative." Tags: Executive comp • Misc. Benefits |
What the Elon Musk Pay Decision Means for Executive Compensation (PDF)
NFP Mar. 1, 2024 "By its own words, the court has gone where no Delaware court dared go before, overriding a favorable shareholder vote to find that an executive compensation package was fundamentally unfair.... [H]ere are three general themes of note from the decision.... [1] The moving goalposts of executive compensation ... [2] Fairness and the minority shareholder ... [3] The substance of the process matters." Tags: Executive comp |
Navigating the Application of a Clawback Policy to Restatements and Recovery Periods Before October 2, 2023
Winston & Strawn LLP [Guidance Overview] Feb. 29, 2024 "[T]he determination of whether compensation is subject to clawback under the Final Rules can be complex, depending on items such as: [1] the date that a restatement of issuer financials is determined to be required, [2] the accounting periods that are restated, and [3] the date that compensation was received." Tags: Executive comp |
IRS Sees Flight Risk with Corporate Jets
Eversheds Sutherland Feb. 27, 2024 "On February 21, 2024, the IRS announced a new initiative to audit large corporate taxpayer use of corporate jets, as part of a larger initiative focused on tax compliance of large corporations and high-income taxpayers. The audits, which will use Inflation Reduction Act funding, will focus significant IRS attention on both corporate deductions and individual taxation related to personal flights for the first time in a decade." Tags: Executive comp |
Executive Compensation Considerations in Out-of-Court Restructurings
Proskauer Feb. 21, 2024 "Retaining key management at a distressed company in the midst of an out-of-court restructuring can be necessary for the success of the restructuring. To realign incentives, private credit lenders need to consider reloading and restructuring equity awards, retention bonuses and change in control payments to maximize the possibility of recouping their investment and promoting future profitability." Tags: Executive comp |
Executive Compensation Design Calls for Radical Simplification
The Harvard Law School Forum on Corporate Governance and Financial Regulation Feb. 19, 2024 "Should a compensation committee ... want to explore alternatives to simplify their designs, here are some examples. [1] Eliminate LTI awards and provide only salary and annual incentives, but require a significant portion of the annual incentive to be deferred into restricted stock ... [2] Eliminate LTI and provide only salary and restricted stock, with shares vesting over a multi-year period. [3] Grant only one form of performance-based long-term incentive to reduce complexity. [4] Grant only stock options that provide a clear pay for performance relationship with shareholder returns, [5] Simplify the number of performance measures used in both annual and LTI awards." Tags: Executive comp • Stock Options |
Setting Executive Compensation: Cautions for Public Company Boards and Compensation Committees
Haynes and Boone, LLP Feb. 14, 2024 "While directors may seek input from an executive, directors have the ultimate responsibility to control the compensation decision-making process.... Boards and compensation committees should retain outside compensation consultants to advise on what is considered reasonable executive compensation.... Directors should be independent of executives, particularly with respect to compensation matters.... All required disclosures to stockholders must accurately describe the material terms of the executive compensation package." Tags: Executive comp |
Executive Travel on the Corporate Jet: First Half 2024 Imputed Income Rates
Winston & Strawn LLP [Guidance Overview] Feb. 13, 2024 "[E]xecutives are increasingly provided travel on the company aircraft for both business and personal purposes.... [A]ny non-business travel invokes Form W-2 income inclusion using the Standard Industry Fare Level (SIFL) rates published by the Department of Transportation twice per year, effective for a six-month period. The rates for the first half of 2024 have just been published." Tags: Executive comp • Misc. Benefits |
Deferred Compensation Arrangements for Non-Profits
Holland & Hart LLP Feb. 6, 2024 "While there are a number of differences between a Section 457(f) plan and a for-profit deferred compensation plan, the biggest is the timing of the taxation of the deferred compensation. A for-profit deferred compensation plan can be designed so that once the right to deferred compensation vests, it can be taxed (for income tax purposes) on the date that it is paid, which can be many years in the future. With a Section 457(f) plan, once the deferred compensation vests, it becomes immediately taxable, even if the plan provides for payment of the deferred compensation in a future year." Tags: 457 Plans • Executive comp • Nonqualified Plans |
New Fire for Enforcing Forfeiture-for-Competition Provisions
The Wagner Law Group Feb. 2, 2024 "[The Delaware Supreme Court] court upheld the enforceability of a forfeiture-for-competition provision, instructing that courts in Delaware should not second guess the reasonableness of a contractual forfeiture-for-competition provision, and the contractual provision should be legally enforceable as a matter of law. This case has serious implications given that many legal entities are formed under Delaware law and employers should therefore consider applying forfeiture-for-competition provisions in their contracts (executive, partnership etc.) as a valid and binding way to protect against harmful competitive conduct from departing employees." [Cantor Fitzgerald, L.P., v. Ainslie, No. 162, 2023 (Del. Jan. 29, 2024)] Tags: Executive comp |
Set Your Executive Incentive Compensation Program for Success
Willis Towers Watson Jan. 26, 2024 "An organization's refined annual operating plan and longer-term strategic plan in a new year spark conversations in the C-suite and boardroom about executive incentives.... Before acting on these topics of conversation, organizations must revisit their executive incentive program's performance measurement framework: performance categories, performance metrics, and relative weightings across both STI and LTI." Tags: Executive comp |
RIP Compensation Committees
Farient Advisors Jan. 17, 2024 "[B]oards are electing to alter their committee structures to keep pace with their increasing oversight demands.... While such changes may at first seem arbitrary, insignificant, or aesthetic, they are indicative of an important development in the realm of corporate governance -- specifically, that many companies have formally delegated additional responsibilities to their compensation committees." Tags: Executive comp |
2024 ISS Policy Update: Severance Arrangements
Dodd-Frank.com Dec. 28, 2023 "ISS will vote on a case-by-case basis on shareholder proposals requiring that executive severance (including change-in-control related) arrangements or payments be submitted for shareholder ratification." Tags: Executive comp • Severance Pay |
Executive Compensation Arrangements for Tax-Exempt Organizations
Venable LLP, via LexisNexis Practical Guidance [Guidance Overview] Dec. 27, 2023 20 pages. "This practice note sets out important legal and tax considerations when developing executive compensation arrangements for tax-exempt organizations, including new excise tax rules enacted under 2017 tax reform legislation. It provides guidance on practical steps for attorneys advising their tax-exempt clients on various aspects of executive total compensation packages, including deferred compensation, incentive compensation, severance, vacation, and fringe benefits." Tags: Executive comp • Nonqualified Plans |
Substantial Risk of Forfeiture Under the Internal Revenue Code
Venable LLP, via LexisNexis Practical Guidance [Guidance Overview] Dec. 27, 2023 11 pages. "This practice note discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, 3121(v)(2), and 4960 of the Internal Revenue Code and the different consequences of the failure to achieve a SRF under each such section. SRF is the standard that the [Code] and Treasury Regulations apply to determine when an employee's or an independent contractor's deferred compensation vests, and therefore may be includable in income for the individual (or deductible for the employer or other controlled group member granting the compensation)." Tags: 409A Plans • 457 Plans • Executive comp • Nonqualified Plans |
Fifth Circuit Sets Aside SEC Share Repurchase Disclosure Rule
planadviser Dec. 21, 2023 "The disclosure regime under the rule would have made it more difficult for corporations to initiate a buyback program on the basis that their stock was undervalued. Similarly, the rule would have revealed if buyback programs were motivated by executive compensation schemes related to stock pricing." [U.S. Chamber of Commerce v. SEC, No. 23-60255 (5th Cir. Dec. 19, 2023)] Tags: Executive comp • Stock Plans |
Phantom Stock Plans: Are They Really That Spooky? (PDF)
Ice Miller, via Employee Benefit Plan Review Dec. 21, 2023 "What is a phantom stock plan? ... Why is phantom equity more preferable than actual equity for a company? ... When should a company offer a phantom stock program? ... When should a company not offer a phantom stock program? ... How does a phantom stock plan work? ... How is the value of a phantom stock unit determined? ... When is payment of the value in the phantom stock made to the executive? ... What are the tax implications of phantom stock?" Tags: Executive comp • Stock Plans |
2023 End of Year Plan Sponsor 'To Do' List: Executive Compensation
Snell & Wilmer L.L.P. Dec. 18, 2023 "[1] Last chance to correct certain Section 409A document failures discovered in 2023 ... [2] Nonqualified deferred compensation deferral elections should be made on or before December 31, 2023 ... [3] Take certain action to address impact of Tax Cuts and Jobs Act on Section 162(m) of the Code ... [4] Review whether equity-based compensation plans have sufficient shares remaining for 2024 awards ... [5] Review director pay practices and consider separate annual limits on director equity awards ... [6] Section 6039 of the code information statements due by January 31, 2024 ... [7] Consider clawback disclosure issues ... [8] Consider 10b5-1 disclosure issues." Tags: 409A Plans • Executive comp |
IRS Regulatory Agenda, Fall 2023
Internal Revenue Service [IRS], U.S. Department of the Treasury [Official Guidance] Dec. 7, 2023 Changes from the Spring 2023 IRS Regulatory Agenda: Added to Proposed Rule stage:
Moved from Proposed to Final Rule stage:
Added to Final Rule stage:
Tags: 401(k) Plans • 409A Plans • Executive comp • Health Plan Administration • Health Plan Design • MHPAEA • Retirement Plan Administration • Retirement Plan Design |