“Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs” – House Passes Financial Reform Bill

On June 8, the House of Representatives passed the Financial CHOICE Act of 2017 in a bid to reform the financial regulatory system created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The bill, which passed the chamber on a vote of 233 to 186, has received support from the Trump Administration but is expected to face resistance in the Senate. 

If passed and signed into law, the bill would relax Dodd-Frank capital requirements, scale back the authority of the Consumer Financial Protection Bureau and repeal the Volcker Rule, which limits the ability of banks to engage in proprietary trading.        Read More ›

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Contemplating a Severance Plan? Consider ERISA

A severance plan may be subject to the requirements of ERISA as an employee welfare benefit plan. The determination of whether a severance plan is subject to ERISA depends in large part on whether the plan is part of an “ongoing administrative scheme.”

Severance plans subject to ERISA have certain requirements, such as the obligation to file annual Forms 5500, to follow ERISA’s formal claims procedure, and to provide a summary plan description (“SPD”), a summary annual report (“SAR”), and any required summaries of material modification (“SMM”) to participants.

For a severance plan subject to ERISA, failure to comply with these requirements can carry a hefty fee – up to $110 per day for failure to provide required documents to participants on request and up to $1,100 per day for failure to file a Form 5500. Read More ›

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Public Companies Should Consider Shareholder Reapproval of Section 162(m) Performance Compensation Plans Approved in 2012

As public companies continue to prepare for the 2017 proxy season, we wanted to provide a final reminder of an executive compensation related item that might require shareholder approval in 2017.  As reported in Part 1 of our End of Year Plan Sponsor “To Do” Lists, Section 162(m) of the Internal Revenue Code limits the deduction a public company may take for compensation payable to “covered employees” to $1,000,000 per year. “Performance-based compensation” that meets the requirements of Section 162(m) is not subject to this limitation. The Section 162(m) regulations require that, if the Compensation Committee has the discretion to select among a variety of performance goals, those goals must be reapproved by shareholders every five years.  Read More ›

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Certain Information Statements for ISOs and ESPPs Due by January 31, 2017

As reported in Part 1 of our 2016 End of Year Plan Sponsor “To Do” List, Section 6039 of the Code requires employers to provide a written information statement to each employee or former employee and file information returns with the IRS regarding: (1) the transfer of stock pursuant to the exercise of an Incentive Stock Option (“ISO”); and (2) the first transfer by the employee or former employee of stock purchased at a discount under an Employee Stock Purchase Plan (“ESPP”).  For ISO exercises and ESPP transfers occurring in 2016, the Section 6039 employee information statement requirement is satisfied by providing Form 3921 (for ISOs) and Form 3922 (for ESPPs) to employees no later than January 31, 2017Read More ›

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Making a List, Checking it Twice

It’s that time of year when boys and girls start making their lists for the holidays, but we in the employee benefits world make a very different kind of list.  In the rapidly changing world of employee benefits and executive compensation law, a checklist can be particularly helpful to make sure important issues do not fall through the cracks.  Each year we publish an executive compensation checklist, a health and welfare plan checklist, and a qualified retirement plan checklist to help individuals stay apprised of changes in the law, changes that they might need to make to their employee benefits plans, and various notice requirements.  Read More ›

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IRS Announces 2017 Retirement Plan Dollar Limits

The IRS recently announced cost-of-living adjustments for 2017 in Notice 2016-62. The key dollar limits, along with last year’s limits, are noted below.

Maximum Qualified Retirement Plan Dollar Limits

  2016 2017
Limit on Section 401(k) deferrals (Section 402(g)) $18,000 $18,000
Dollar limitation for catch-up contributions (Section 414(v)(2)(B)(i)) $6,000 $6,000
Limit on deferrals for government and tax-exempt organization deferred compensation plans (Section 457(e)(15)) $18,000 $18,000
Annual benefit limitation for a defined benefit plan (Section 415(b)(1)(A)) $210,000 $215,000
Limitation on annual contributions to a defined contribution plan (Section 415(c)(1)(A)) $53,000 $54,000
Limitation on compensation that may be considered by qualified retirement plans (Section 401(a)(17)) $265,000 $270,000
Dollar amount for the definition of highly compensated employee (Section 414(q)(1)(B)) $120,000 $120,000
Dollar amount for the definition of a key employee in a top-heavy plan (Section 416(i)(1)(A)(i)) $170,000 $175,000
Dollar amount for determining the maximum account balance in an ESOP subject to a five-year distribution period (Section 409(o)(1)(C)(ii)) $1,070,000 $1,080,000
SIMPLE retirement account limitation (Section 408(p)(2)(E)) $12,500 $12,500
Social Security Taxable Wage Base $118,500 $127,500

  Read More ›

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Settlement of Calma v. Templeton Provides Guidance on Setting Director Pay

In response to recent lawsuits by the plaintiffs’ bar, I have previously posted about why public company employers may wish to consider adding a separate annual limit on non-employee director equity awards. Just last month the Delaware Chancery Court approved a settlement of Calma v. Templeton, a case in which Calma challenged the size of director equity awards granted under Citrix’s shareholder-approved equity compensation plan.  Among other things, the settlement provides what some practitioners believe to be a reasonable framework for structuring director compensation programs on a go-forward basis.  Key provisions of the settlement are as follows:

  • Citrix agreed to amend its equity compensation plan to incorporate a $795,000 cap on the value of equity awards that may be granted to any one non-employee director in any one year. 
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IRS Finalizes Regulations Simplifying 83(b) Filing Requirements

On July 23rd of last year, I blogged on a set of proposed regulations eliminating the requirement that a taxpayer attach a copy of his or her Section 83(b) election to their individual tax return.  This July, the IRS made the proposed rule final and the final regulations eliminate the requirement that a taxpayer attach a copy of their Section 83(b) election to their tax return for the year in which the restricted property was transferred. This change should be welcomed by taxpayers who file electronic federal tax returns because commercial software does not consistently allow taxpayers to attach a copy of the Section 83(b) election to an electronically filed return. Read More ›

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IRS Issues Additional Guidance on Determination Letter Program

As was previously announced in 2015, effective as of January 1, 2017, the Internal Revenue Service (“IRS”) is eliminating its five year staggered determination letter cycle for individually designed retirement plans. Plans in the current cycle (Cycle A) still may submit their plans for determination letters on or before January 31, 2017.  Pursuant to Revenue Procedure 2016-37, going forward, individually designed plans will only be permitted to submit a determination letter application on initial plan qualification, plan termination and in certain other circumstances as announced by the IRS.

The IRS did not provide much guidance on the other circumstances in which existing plans would be permitted to seek determination letters in the future, other than to provide that it will give consideration to significant changes in the law, new approaches to plan design and the IRS’ current case load and resources. Read More ›

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Changes to Accounting Rules Alter Approach to Share-Based Withholding

Earlier this year the Financial Accounting Standards Board released Accounting Standards Update No. 2016-09 (the “ASU”) to improve the accounting treatment of certain stock-based compensation payments.  Among other updates, the ASU modifies the manner in which employers withhold on stock-based compensation awards. 

Under the current accounting rules, one requirement for favorable equity (rather than liability) accounting treatment is that the employer limit the amount it can withhold in connection with stock-based withholding to the minimum statutory amount necessary to satisfy taxes.  The ASU provides that equity accounting treatment will be retained if an employer withholds at the maximum statutory amount necessary to satisfy taxes (or allows the employee to elect his or her withholding rate as long as the elected rate does not exceed the maximum statutory rate in the employees’ applicable jurisdiction).  Read More ›

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