Employers must file a protective refund claim with the Internal Revenue Service by April 15, 2014, if they wish to preserve their right to a refund of Federal Insurance Contribution Act (“FICA”) taxes paid on certain severance payments made during the 2010 tax year to employees who were involuntarily terminated. As discussed in our September […]

In Notice 2010-80, the Internal Revenue Service (“IRS”) provided a remedial period until December 31, 2012, to correct nonqualified plans or agreements subject to Section 409A of the Internal Revenue Code (“Section 409A”) that pay compensation at separation from service, but base the timing of the payment on when a release of claims is submitted. […]

The IRS continues to provide both formal and informal guidance on the application of Internal Revenue Code Section 409A (“Section 409A”). Failure to comply with Section 409A creates serious and expensive tax issues. Below is a list of some common Section 409A errors. Substitution Payments When an executive is terminated, a company may seek to […]

Now that the Securities and Exchange Commission (the “SEC”) has issued final rules implementing the shareholder advisory voting provisions under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), it is a good time to consider how your company will allocate responsibilities between the board of directors, the compensation committee and management […]

On January 5, 2010, the IRS issued a document correction program (“Notice 2010–6” or “Document Correction Program”) for nonqualified deferred compensation (“NQDC”) plans subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). Previously, in Notice 2008–113 the IRS had provided correction procedures solely for unintentional operational errors under NQDC […]

The Board of Governors of the Federal Reserve System has recently issued Proposed Guidance on Sound Incentive Compensation (“Proposed Guidance”). While the Federal Reserve’s Proposed Guidance is generally consistent with the principles in the other government initiatives regarding risk management and corporate governance of incentive compensation, the Proposed Guidance is more comprehensive and provides detailed […]

Introduction Many companies have implemented severance plans due to the current economic situation. While companies typically consider the employment law implications of severance plans (such as the Age Discrimination in Employment Act), many have not considered how these plans are governed by the Internal Revenue Code of 1986, as amended (the “Code”) and the Employee […]

This newsletter provides an overview of the following seven areas of executive compensation: Applicable to Most Employers The IRS correction program for certain operational violations of Internal Revenue Code section 409A (“Section 409A”). Reporting obligations for incentive stock options (including ESPP grants) that must be made by January 31. The U.S. Department of Labor Top-Hat […]

On October 23, 2007, the IRS issued Notice 2007–89 (the “Notice”), which provides guidance related to the reporting and wage withholding requirements for non-qualified deferred compensation arrangements under Section 409A of the Internal Revenue Code of 1986 (the “Code”), as amended. The Notice provides similar information to that provided in Notice 2006–100, which included guidance […]

On September 10, 2007, the Treasury Department and IRS issued Notice 2007–78 (the “Notice”), which provides transition relief and additional guidance on the application of Internal Revenue Code section 409A and the related regulations (“Section 409A”) to nonqualified deferred compensation plans. Transition Relief Background Section 409A generally applies to amounts deferred under a nonqualified deferred […]

Both the Senate and the House have recently passed bills that would increase the federal minimum wage. However, the Senate bill also contains provisions that would have a significant impact on executive compensation, which are not contained in the House bill. Legislative History On February 1, 2007, the Senate passed the Small Business and Work […]

On November 30, 2006, the IRS issued Notice 2006–100 (the “Notice”). The Notice provides guidance related to reporting and wage withholding requirements for non-qualified deferred compensation arrangements under Section 409A of the Internal Revenue Code (the “Code”). The reporting and wage withholding requirements are for calendar years 2005 and 2006 and apply to deferred compensation […]