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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?"

Are You Handling Your FICA Taxes on Deferred Compensation Properly?

"In defined benefit (DB) SERPs and Restoration Plans ... there are multiple ways of handling the FICA situation. Most prominently, the sponsor may calculate (and remit) FICA taxes when they are reasonably ascertainable ... or by early inclusion which essentially means that FICA is calculated and paid annually. Early inclusion is sometimes more beneficial than waiting until retirement, but it is also more administratively complex.... Suppose your plan specifies early inclusion and you've not been doing that, do you have a problem? You might."

Tax Bill Would Change the Face of Executive Compensation

"The draft would amend Code Section 162(m) (the $1 million pay cap) to eliminate the exemption for performance-based compensation. In addition, that section would be amended to cover the Chief Financial Officer in addition to the Chief Executive Officer. Code Section 409A would be repealed (you thought that was good news, didn't you?) and replaced with a new Code Section 409B. Essentially, 409B as drafted would apply the much more stringent taxation upon vesting rules that have previously applied generally only to 457(f) plans."

PCAOB Expands Purview of Accounting Profession to Review Executive Compensation Arrangements

"[The Public Company Accounting Oversight Board (PCAOB)] and the SEC are either assuming that auditors have sufficient expertise in compensation arrangements to handle this undertaking or that the firms of which they are a part have this expertise internally to which the auditors may refer. At the Big 4, this is probably the case. They have massive staffs and are able to engage specialists to handle such complex questions. How about the next tier of auditing firms? Do they have this expertise?"

Senate Finance Committee Mulls Executive Compensation Changes

"[H]ere are the proposals that the Finance Committee 'may wish to consider' as it moves forward ... Revise the limits on the deductibility of executive compensation... Modify or repeal Code Section 409A.... Repeal NQDC.... Repeal incentive (at the money) stock options.... Modify deductibility of stock options.... Revise golden parachute rules."

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."

Using Retirement Benefits to Solve the Challenge of Hospital Sector Employment

"[H]ospitals, perhaps more than any other classification of employer in the U.S., have particularly interesting challenges when it comes to attracting and retaining their employees, mostly professionals. And, as hospital organizations have become a primary employer of physicians, the difficulties only increase.... You need a solution that meets all of these criteria: [1] Costs are stable; [2] Ability for very high-paid people to defer significantly is there; [3] Nondiscrimination testing is easy to pass; [4] Benefits are portable; [5] Both lump sums and wholesale priced annuities (annuities from the plan as compared to from a mutual fund provider or insurer) are available."

Pension Changes Affecting Executive Comp Disclosures; Proxy Hysteria Arrives

"Bloomberg reported in a video and an article that GE CEO Jeffrey Immelt was rewarded with an 88% increase in compensation despite sluggish performance. The company attributed the compensation increase to his reshaping of the company and to an increase in the value of his pension.... The pension plans in which Immelt participates did not change. He wasn't granted a massive benefit increase resulting in his total compensation doubling. What happened was that his 2014 compensation replaced his 2009 compensation (remember 2009 was a horrible year for the US and global economies) in a 5-year average, pension discount rates dropped (this increases the present value of pension benefits), and the Society of Actuaries released a new mortality table (I suspect GE adopted it) reflecting longer life expectancies in general."

How the SEC Got DB Plans All Wrong

"What the rules ask be disclosed as compensation with respect to a defined benefit plan (qualified or nonqualified) is the increase, if any, in the actuarial present value of accrued benefits from one measurement date to the next. That seems simple and reasonable enough on its face, but that is exactly where, how, and why the SEC went wrong.... [T]he SEC methodology puts an inappropriate burden on companies sponsoring DB plans. For some, this may signal a reason for them to exit that space ... for all the wrong reasons."

Derisking Your Defined Benefit Plan -- or Not

"80%-90% of plan sponsors are pleased with the risk management actions they have taken to date. What makes them pleased? ... What all of these plan sponsors did was to decrease future volatility in pension costs (however they choose to think of cost). For many, that truly was a good thing. But, at what cost? For some, that cost was significant. For others, it was not."