Understanding Employee Benefits

More on Discounted Stock Options Under Section 409A


My colleague Jeff Cairns blogged about a recent court case confirming the IRS’s position that discounted stock options can be considered noncompliant nonqualified deferred compensation arrangements under Section 409A of the Internal Revenue Code. Unless structured to be exercised only on a fixed date or an allowable 409A event, discounted... Read More

Topics: Deferred Compensation and 409A, Executive Compensation

Section 409A Tax Assessed on Discounted Stock Options – Taxpayer Sues for Refund in Federal Court of Claims


Code Section 409A which was effective in January 1, 2005, provides strict rules that must be applied to most deferred compensation arrangements accruing benefits after the effective date. Failure to comply with the Code and the applicable Treasury Regulations can result in a 20% surtax plus interest on the amounts... Read More

Topics: Deferred Compensation and 409A, ERISA and Other Benefits Litigation, Executive Compensation, Payroll

Do I Have A Top Hat Plan?


A standard part of an executive compensation package can be participation in a nonqualified deferred compensation plan. This is a plan not subject to tax code limitations on qualified retirement plans and not subject to many provisions of ERISA, including the requirement that plan assets be set aside in a... Read More

Topics: Executive Compensation



Our sister blog, Dodd-Frank.com, recently published summaries of the respective proposed rules for public companies issued by the New York Stock Exchange and the NASDAQ in entries on September 25 and September 26. You may access the summaries through the following links: http://dodd-frank.com/nasdaq-proposes-rules-regarding-independence-of-compensation-committees and http://dodd-frank.com/nyse-proposes-rules-regarding-independence-of-compensation-committees-and-compensation-advisers Each of the proposed rules... Read More

Topics: Compensation Questions, Executive Compensation

It is Always Good to Follow the Plan’s Claims Procedure in Denying a Claim


A recent Eighth Circuit Court of Appeals decision involved high ranking executives who participated in a company’s long-term incentive plan. Under the plan agreements, executives who did not continue employment for a three year performance period forfeited benefits under the plan unless they qualified for a pro-rated award. A pro-rated... Read More

Topics: Compensation Questions, Deferred Compensation and 409A, ERISA and Other Benefits Litigation, Executive Compensation

Top Hat Plan Benefits Can Be Garnished


In a recent District Court decision, a court held that non-qualified deferred compensation benefits being paid  to a participant under a “top hat” plan could be garnished by the participant’s creditor. Employers who sponsor plans covered by ERISA know that creditors cannot garnish a participant’s benefits under a qualified retirement... Read More

Topics: Deferred Compensation and 409A, Executive Compensation, Payroll

Agreement With Single Employee is Not an ERISA Plan


If an arrangement is subject to ERISA, state law claims relating to that arrangement are preempted. In some situations, therefore, employers try to argue that a particular arrangement is subject to ERISA. In a recent decision involving a state law breach of contract claim, the Eighth Circuit Court of Appeals... Read More

Topics: Deferred Compensation and 409A, ERISA and Other Benefits Litigation, Executive Compensation