Executive Compensation

Join us Wednesday, March 21 at 1:00 pm (EDT) for an in-depth webinar on navigating cross-border mergers and acquisitions. Partners Alexander Lee and Maureen O’Brien along with Rob Wellner from Velocity Global will be presenting the unique tax, employment, benefits and executive compensation issues that arise during and after a global transaction. With these insights, participants will learn how to manage challenges associated with M&A activities and implement new solutions that streamline the process.

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McDermott’s Benefits Emerging Leaders Working Group provides benefit professionals with tools to better serve employees in an ever-changing and evolving benefits landscape.

Presentations will tackle the latest benefits hot topics and best practice solutions, supplemented with important networking opportunities aimed to connect tomorrow’s benefit leaders with a broad network of professionals.

Planned agenda topics include:

  • What’s Happening in Washington?
  • Lessons from an RFP
  • Lunch Discussion: Changing Behavior through Benefits Communication
  • Global Benefit Plans
  • Moderated Group Discussion (including Voluntary Benefits)

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Section 162(m) of the Internal Revenue Code (Code) previously limited the tax deduction to $1M annually for covered employee compensation paid by a company that is publicly traded, subject to some important exceptions. The Tax Cuts and Jobs Act modified the reach of Code Section 162(m) in several significant ways.

  • Expanding the number of companies to which Section 162(m) will apply, including non-public companies that register debt or equity securities with the Securities and Exchange Commission, like foreign companies publicly traded through American depositary receipts (ADRs);
  • Expanding the number of covered employees to five and including the chief financial officer, with a provision that any covered employee after 2016 permanently remains a covered employee;
  • Eliminating performance-based and commission-based exceptions to the $1M deduction limit; and
  • Grandfathering certain compensation provided under a written and binding agreement in effect on November 2, 2017, if no material changes are made to such agreement.

These changes will have a significant effect not just on performance-based compensation, but also on stock options, stock appreciation rights and even nonqualified deferred compensation plans and supplemental executive retirement plans. To navigate these changes, Andrew Liazos stressed the importance of understanding the new grandfathering provisions under Section 162(m) and their corresponding planning opportunities at the Mid-Year Meeting of the American Bar Association’s Tax Section on February 10, 2018 in the attached slides.

Patrick McCurry and Todd Solomon wrote this bylined article on how family offices are using sophisticated techniques to compensate their employees in a tax-efficient manner. “We expect to see the continued use of equity to deliver tax-efficient compensation to family office employees while aligning the economic interests and incentives of the family and the family office’s key employees,” the authors wrote.

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Originally published in Tax Executive, February 1, 2018.

Beginning April 1, 2018, new disability claim regulations may apply to some executive compensation arrangements. Given this pending regulatory deadline, employers need to analyze which of their executive compensation arrangements may be subject to the enhanced requirements for disability claims review.

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The end of a year and beginning of the next generally starts the countdown to the public company proxy season. But before moving into 2018, registrants would be well served by first looking back to the guidance that came out of the SEC at the end of 2017.

During the last quarter, the SEC staff had their hands full preparing for new standards impacting registrants’ filings this year, keeping pace with tax reform, tweaking the shareholder proposal process and corralling a burgeoning cryptocurrency market.

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Michael Peregrine and Ralph DeJong wrote this bylined article about what they called the “enormous consequences” for tax-exempt hospital senior executive compensation due to the new Tax Cuts and Jobs Act provisions that place an excise tax on executive compensation and benefits. “From a corporate governance perspective, the significance of these new provisions carries the potential for recalibrating the relationship between the board and its executive compensation committee,” the authors wrote.

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Originally published in Bloomberg BNA’s Health Law Reporter, January 2018.

On Wednesday, both houses of Congress voted to pass the final tax reform bill (the Act) and send it to President Trump for signature.  The Act represents the most sweeping overhaul of the tax code in decades and will have a significant impact on businesses and individual taxpayers. The final bill also includes changes that will impact employer-provided benefits, including fringe benefits, certain types of executive compensation and benefits provided through tax-qualified retirement plans.

For more information about some of these changes, please see our On The Subject publications or visit our Tax Reform Resource Center.