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Executive Compensation: Converging Forces of Change
Few could have predicted the magnitude and number of forces that would bear down on executive compensation over the past year. The Conference Board Commission on Public Trust and Private Enterprise rightfully called the aggregated events a “Perfect Storm.” The Sarbanes-Oxley Act, passed in July of 2002, is just the beginning. It broadly affects financial reform, criminal penalties, and corporate governance. From a compensation perspective, it prohibits loans to officers and affects insider trading by requiring insiders to report trades within two business days and prohibiting sales during 401(k) blackout periods. The SEC’s delay in clarifying vague aspects of the Act in areas such as loans prolongs the storm and confusion. Watson Wyatt’s Position on the Recently Proposed U.S. Retirement Plan Age Discrimination Regulations
The IRS and U.S. Treasury Department released proposed regulations concerning age discrimination in employer-sponsored retirement plans in December 2002. FASB Issues New Disclosure Standard on Transition and Disclosure of Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board (FASB) issued FAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure, which amends FAS 123, Accounting for Stock-Based Compensation. IRS Blesses 2002 Plan Amendments Applying the $200,000 Pay Limit to Former Employees
In recently released Revenue Rule 2003-11, the IRS approves plan amendments retroactively applying the $200,000 compensation limit to all former employees effective as of the first plan year beginning after December 31, 2001. Defined Contribution Plans and the Safest Available Annuity Provider Rule
In Advisory Opinion 2002-14A, the U.S. Department of Labor (DOL) responds to a request from an insurance company for clarification of how the safest available annuity provider requirements, described in Interpretive Bulletin (IB) 95-1, apply to defined contribution plans. IRS Extends Deadline for Adopting Minimum Distribution Amendments and Complying with Restrictions on Annuity Payments
In Revenue Procedure 2003-10, the IRS extends the deadline for plan sponsors to amend their
defined benefit (DB) plans to comply with the 401(a)(9) final and temporary regulations.
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