Legislating Executive Compensation: Unintended Consequences Ahead?
As a new administration takes office, companies are preparing for what is anticipated to be a lively congressional debate on perceived inequities between compensation paid to corporate executives versus that paid to rank-and-file employees. While many new ideas are certain to emerge between now and then, we’ve seen a number of proposals, some of which have become part of the recent bank bailout legislation. In addition, shareholder activists have enjoyed some success in winning approval for “say on pay” shareholder votes. The German Pension System in Brief
Germany has built its retirement system on three pillars: Social Security, occupational pensions and individual retirement investments. In this article, we focus on the first two pillars; the third pillar is still relatively small in Germany. FAS 123(R) Option Assumptions: The 2007 Results
Watson Wyatt recently completed its second annual analysis of stock option valuation assumptions and results under Statement of Financial Accounting Standards (SFAS) 123(R). From 2006 to 2007, the percentage of companies disclosing option fair values decreased from 74 percent to 73 percent, and the number disclosing stock compensation expense increased from 93 percent to 94 percent. Median stock compensation expense increased by 9 percent in 2007. Fiduciary Responsibility and ETIs: A Conflict?
The U.S. Department of Labor (DOL) recently issued Interpretive Bulletin 08-1, which warns plan fiduciaries against selecting investments to promote public policy preferences. The notice specifically addresses economically targeted investments (ETIs), which create economic benefits apart from their investment return. The bulletin replaces Interpretive Bulletin 94-1 and clarifies and formalizes the DOL’s position. Many Older Workers Unaware of Retirement Distribution Options
As workers approach retirement, they must make decisions that will affect their long-term financial futures. One of these is choosing the form of distribution from their defined benefit (DB) plan and defined contribution (DC) account. While there might be several distribution options, for many DB plan participants it comes down to a choice between a life annuity and a lump sum. But how many older workers know enough to make an informed decision? DOL Finalizes Fiduciary Safe Harbor for Selection of DC Plan Annuity Providers
The U.S. Department of Labor (DOL) has finalized regulations establishing a safe harbor for the selection of an annuity provider and purchase of annuity contracts for defined contribution (DC) plans. The final regulations simplify the safe harbor proposed in September 2007 and clarify that the safe harbor is an optional means of satisfying the fiduciary standards of the Employee Retirement Income Security Act (ERISA). The regulations took effect Dec. 8, 2008. IRS Proposes Regulations on Consequences of Failing to Defer for DB and DC Plans
The IRS has proposed regulations that would require plan sponsors to include more information in the participant notices explaining the consequences of failing to defer a distribution. The regulations also would extend from 90 days to 180 days the election period for waiving the Qualified Joint and Survivor Annuity (QJSA) and the period for distribution of notices addressing rollover eligibility and the tax treatment of distributions. Valuing Stock Options: Is It Time to Reconsider Binomial Lattice Models?
Valuation models were the subject of intense debate during the drafting of “Statement of Financial Accounting Standards (SFAS) No. 123(R) — Share-Based Payment.” The exposure draft would have required companies to use a binomial lattice model (or something similar) to value employee stock option awards, but the final standard has allowed companies to use either a binomial lattice or a closed-form model, such as Black-Scholes, without preference.
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