IRS Releases Clarifying 162(m) Regulations

The IRS recently released final regulations clarifying two aspects of the “performance-based compensation” exception to the $1,000,000 limit on deductible compensation paid to covered employees under Section 162(m) of the Internal Revenue Code.

Proposed regulations issued in 2011 provided that in order to qualify awards as “performance-based compensation” a shareholder approved equity plan must specify the maximum number of shares with respect to which options and stock appreciation rights may be granted during a specified period to any individual employee. Under the final regulations, a plan will satisfy this “per-employee limitation” requirement if the plan specifies an aggregate maximum number of shares with respect to which stock options, stock appreciation rights, restricted stock, restricted stock units, and other equity-based awards may be granted to any individual employee during a specified period.  Read More ›

Posted in Employee Benefits, Executive Compensation | Tagged , , , ,

Share this Article:

Don’t Miss Short-Term Deferral Day

Section 409A, the provision of the Internal Revenue Code that regulates the time and form of payment of nonqualified deferred compensation, contains a helpful exception for “short-term deferrals.”  Specifically, Section 409A provides that a payment will not be considered nonqualified deferred compensation if the employer makes the payment on or prior to the 15th day of the third month following the end of the employee’s (or, if later, the employer’s) taxable year in which the employee’s right to the payment vests.  For individuals and for employers with calendar fiscal years, the key date for purposes of the short-term deferral exception is March 15th. Read More ›

Posted in Employee Benefits, Executive Compensation | Tagged , , , , , ,

Share this Article:

Public Companies Should Consider Shareholder Reapproval of Section 162(m) Performance Compensation Plans Approved in 2009

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, every five years, the shareholders reapprove the performance goals that determine the amount of “performance-based compensation” to be paid. This means that companies that obtained shareholder approval of plans containing Section 162(m) performance goals in 2009 must resubmit the plans for shareholder approval in 2014. Read More ›

Posted in Employee Benefits, Executive Compensation | Tagged , , , ,

Share this Article: