New Internal Revenue Service (IRS) guidance expands the availability of Coronavirus Aid, Relief and Economic Security Act (CARES Act) distributions and loans under eligible retirement plans, and it provides important clarifications regarding how to administer and report CARES Act distributions and loans. The guidance also provides welcome relief for a participant who receives a CARES Act distribution, allowing the participant to revoke an otherwise irrevocable salary deferral election under a nonqualified deferred compensation plan. Finally, consistent with prior guidance, the new IRS guidance confirms that CARES Act provisions are optional, meaning that plan sponsors may choose whether to implement CARES Act changes. Access the full article.
The US Department of the Treasury has released long-expected proposed regulations regarding the section 4960 excise tax on certain remuneration or separation amounts paid to the five highest paid employees of a tax-exempt organization. The new proposed regulations continue the tough approach previously taken on section 4960 issues, while also providing some new exceptions and important clarifications. Access the full article.
Reassessing Executive Compensation and Benefits in Tax-Exempt Organizations as the COVID-19 Crisis Deepens
Hospitals, health systems and other tax-exempt organizations are responding to a longer and deeper economic crisis by making or considering significant changes to their executive compensation and executive benefit programs. The economic crisis, and these executive compensation and benefit changes, have far-reaching implications for the ongoing work of the board’s compensation committee. We want to provide this review of what we see happening “on the ground” as the crisis continues. Access the full article.
In the ongoing effort to help individuals impacted by COVID-19, Congress passed the Coronavirus Aid, Relief, and Economic Securities Act (CARES Act) on March 27, 2020. The President signed the CARES Act into law the same day. The historic stimulus package provides wide-ranging relief for both employers and employees. This includes rules that impact health and welfare, retirement and executive compensation plans and programs. For more information about the impact of the CARES Act on employer-provided benefits, access our On the Subject articles on the: Impact of the CARES Act on Health and Welfare Benefits Impact of the CARES Act on Retirement Plans and Student Loan Benefits Impact of the CARES Act on Executive Compensation In addition, for information about the frequently asked questions regarding health and welfare, retirement and executive compensation issues in the COVID-19 era, access our FAQs.
Coronavirus (COVID-19) raises serious concerns for employers of all shapes and sizes, across all industries and in every business sector. As the impact of COVID-19 continues to grow, many employers are faced with new challenges that affect not only their businesses and their employees, but the health and welfare, retirement and executive compensation plans and programs on which those employees rely. These new issues are arising in addition to the myriad benefit plan challenges that employers face each day. We address a number of frequently asked questions regarding health and welfare, retirement and executive compensation issues in the COVID-19 era. This includes not only questions about issues employers are currently facing, but questions about issues employers may face going forward. Given the rapidly evolving nature of the crisis, McDermott’s Employee Benefits and Executive Compensation team will periodically update these FAQs to provide you with the most...
Several new, highly public developments showcase prominent executives being subjected to significant financial penalties, loss of employment and reputational damage arising from allegations that they bore responsibility for corporate scandals to which they contributed, directly or indirectly. Even though these developments are unique in their nature and scope, the sheer magnitude of the penalties asserted and the intensity of the media coverage are likely to attract significant attention in the executive community. They’ve been page-one news; people are noticing and boards may be expected to react. McDermott’s Michael Peregrine authored an article for Forbes in which he discusses how the spotlight on individual accountability is getting a little bit brighter. Access the full article. Originally published on Forbes, February 2020
The most significant issues in any employment or severance agreement are going to be personal to that situation, and will be driven in part by special issues and circumstances. For instance, succession planning issues may be incredibly important to the organization when the CEO is 65 years old and there is no clear successor, and may be far less important when the CEO is 45 and there are very able executives ready to assume the CEO role if necessary. With that said, there are certain considerations to keep in mind for all who are drafting these contracts. McDermott’s Ralph E. DeJong contributes to an article in The Practical Lawyer that identifies and describes what frequently are the most important considerations in an employment or severance agreement between an exempt organization and its CEOs. Access the full article. Originally published in The Practical Lawyer, December 2019
Public companies would have a harder time evading a stricter limit on deductions for compensation paid to top executives under an IRS proposal. The proposed regulations (REG-122180-18) implement a 2017 tax law provision that expanded the scope of tax code Section 162(m), which prevents public companies from getting a tax deduction for executive compensation exceeding $1 million. The rules target a workaround under which corporations could potentially skirt the limit by paying certain top executives part of their compensation through a partnership. McDermott’s Andrew C. Liazos contributes to a Bloomberg Law article that takes a look at how the IRS is working to curb the workaround of the limit on executive pay tax break. Access the full article. Originally published on Bloomberg Law, December 2019
Corporations looking to use partnerships to avoid the executive compensation deduction limitation may be out of luck. The new proposed regs (REG-122180-18) on the section 162(m) executive compensation deduction limitation include a rule on compensation paid by a partnership to an executive of a publicly held corporation that’s subject to the limitation. McDermott’s Andrew C. Liazos contributes to a Tax Notes article that takes a look at these new regulations and what they mean for partnership arrangements. Access the full article. Originally published on Tax Notes, December 2019
In-house counsel and human resources professionals at tax-exempt colleges and universities often face a variety of challenges when structuring, and determining obligations due under, severance arrangements. There are some key considerations to bear in mind, which are outlined in this article. Access the full article.