Salary Deferrals in the Time of COVID-19

As the saying goes, “drastic times call for drastic measures” and, from an economic standpoint, these are drastic times. To fight the battle to stay in business many employers are considering a wide range of alternatives, including employee furloughs, layoffs and terminations. While some employers may also consider sweeping salary reductions, other employers may consider reducing current salaries with the promise to pay those salaries in the future. Employers taking this latter approach must understand that deferring salaries from 2020 to 2021 (or to some other future year) can create compliance issues under Section 409A of the Internal Revenue Code (“409A”). Read More ›

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Updated Glass Lewis Proxy Voting Guidelines

I previously blogged about certain compensation related updates to ISS’ proxy voting guidelines for 2020.  With proxy season in full swing, I wanted to highlight some important compensation related changes to the Glass Lewis 2020 voting guidelines, a full copy of which can be found here.

  • Contractual Payments and Arrangements. In their 2020 guidelines, Glass Lewis clarifies its policy for say-on-pay proposals with respect to the analysis of both ongoing and new contractual payments and executive entitlements. In particular, Glass Lewis has provided a list of certain executive employment terms that may result in a negative say-on-pay vote recommendation, which includes, but is not limited to: (i) excessively broad change in control triggers; (ii) inappropriate severance entitlements; (iii) inadequately explained or excessive sign-on arrangements; (iv) guaranteed bonuses (especially multi-year guarantees); and (v) the failure to address any concerning practices in amended employment agreements. 
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Enjoy the End of the Decade with Some Employee Benefit Plan Checklists

Each year, we publish health and welfare, cost-of-living, qualified retirement plan, and executive compensation plan checklists to help individuals and employers stay apprised of updates to the law of employee benefits.  We just published the last of these annual checklists.  In case you missed them, the links are below.

Happy Holidays!

2019 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare

2019 End of Year Plan Sponsor “To Do” List (Part 2) Annual Cost of Living Adjustments

2019 End of Year Plan Sponsor “To Do” List (Part 3) Qualified Retirement Plans

2019 End of Year Plan Sponsor “To Do” List (Part 4) Executive Compensation

 

  Read More ›

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The Ninth Circuit Reverses Itself and Enforces ERISA Mandatory Arbitration Clause

A three-judge panel of the Ninth Circuit recently decided that Charles Schwab Corp. can require a proposed class action to arbitrate its claim that Schwab breached its fiduciary duties by including Schwab-affiliated investment funds in the Plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates.  In doing so, the Ninth Circuit overturned its former decision in which it held that ERISA claims cannot be arbitrated.

Specifically, the Ninth Circuit panel determined that the Ninth Circuit’s 1984 opinion in Amaro v. Continental Can Co. should no longer be followed because of more recent precedent permitting ERISA claims to be arbitrated, including the U.S. Read More ›

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DOL Finalizes Regulations Requiring Electronic Filing of Top Hat Statements

On June 17th the Department of Labor finalized a set of proposed regulations requiring that all “top hat” plan statements be filed with the Department electronically though this website.  As brief background, a “top hat” statement is a one-time filing made with the Department of Labor to protect against a non-qualified plan established for a select group of management or highly compensated employees becoming subject to some of the more onerous requirements of ERISA.  Accordingly, to maintain this protection, effective August 16, 2019, “top hat” filings must be made electronically.

The Department introduced the proposed regulations on the electronic filings in September 2014 and has indicated that since the release of the proposed regulations 54% of the “top hat” filings received have been made electronically.  Read More ›

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Director Compensation Update

I’ve written a number of articles and blogs about some sticky issues that can surface in the context of setting pay for public company non-employee directors (here, here, here, and here).

On March 6th the parties to the In re Investors Bancorp, Inc. Stockholder Litigation, filed a settlement agreement with the Delaware Chancery Court.  By way of background, the Investors Bancorp decision limited the shareholder ratification defense for non-employee director equity awards that were granted on a discretionary basis. The equity plan at issue in In re Investors Bancorp, which had been approved by the company’s shareholders, provided that the maximum number of shares that could be delivered to all non-employee directors, in the aggregate, would be capped at 30% of all option or restricted stock unit or restricted stock awards available for grant under the plan.  Read More ›

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Certain Information Statements for ISOs and ESPPs Due by January 31, 2019

As reported in Part 4 of our 2018 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 2018, 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, 2019Read More ›

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New IRS Guidance Throws a Pass to Certain Universities That Pay Coaches Compensation in Excess of $1,000,000

In Notice 2019-09 (“Notice”), the IRS provides relief from the new excise tax to certain colleges and universities that pay their “covered employees” more than $1 million per year or pay excess parachute payments.  Specifically, the Notice provides that the new excise tax under Code Section 4960 does not apply to a governmental entity (including a state college or university) that is not tax-exempt under Code Section 501(a) and does not exclude income under Code Section 115(l).  Therefore, those state universities that do not rely on either of these statutory exemptions from income are not subject to Code Section 4960 even if they pay their coaches (or other covered employees) more than $1 million.   Read More ›

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The 162(m) Transition Rule Guidance Has Arrived

On August 21, 2018, the IRS released Notice 2018-68 providing its initial guidance on the Tax Cuts and Jobs Act (Act) transition rule for changes under 162(m).  Before the Act, 162(m) limited a public company’s tax deduction to $1,000,000 for annual compensation paid to its “covered employees” (i.e., the CEO and the other three most highly compensated executives (excluding the CFO)).  Important pre-Act limitations/exceptions to this rule included (i) a more narrow definition of covered employee, and (ii) an exclusion for performance-based compensation.

The Act substantially broadened the definition of covered employee and eliminated the performance-based compensation exception. However, the Act offered a transition rule for compensation paid under a written binding contract that was in effect on November 2, 2017 and that is not materially modified after that date. Read More ›

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Settlement of Solak v. Barrett May Provide Additional Guidance on Setting Director Pay

I’ve stressed how important it is for public company executives and directors to stay apprised of developments in the director pay area, including developments/settlements of director pay lawsuits.  Earlier this summer, the Delaware Chancery court approved a settlement of Solak v. Barrett, a case in which the plaintiffs alleged that the directors of Clovis Oncology breached their fiduciary duties by adopting a compensation plan that overcompensated themselves, in relation to companies of comparable market capitalization and size. In their complaint, the plaintiffs cited as evidence, the fact that the non-employee directors of Clovis each had been paid an average of $429,163 annually between 2012 and 2016, while Fortune 50 companies pay their directors a median total of $281,667 a year and S&P 500 companies pay an average $277,237 a year.  Read More ›

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