INSIDER

IRS Clarifies 162(m) Ruling Position — Finance Departments Breathe Sigh of Relief
In January, the IRS released a private letter ruling (PLR) calling into question the tax deductibility of pay-for-performance plans that pay out at target at “not for cause” or “good reason” terminations or at retirement. Had that ruling been the last word, many companies would have had to scramble to change their financial statements and their plans. Thankfully, the IRS subsequently issued a revenue ruling that ratchets down the urgency. [March 2008]

Executive Pay: A Proposal to Protect Core Pay-for-Performance Programs
The U.S. executive pay-for-performance model is not only viable, it is essential to the continued success of corporations and the U.S. economy.  [March 2008]

Much Talk, Little Action During 2007 Legislative Session
Mental health parity. 401(k) fees. Deferred compensation. COBRA. Carried interest. Medicare. Expatriate taxation. These are just some of the benefit and compensation issues Congress discussed last year. During 2007, lawmakers evinced a continuing desire to enact legislation that would affect employer-sponsored health, retirement and compensation programs – yet very little of that legislation passed. The year also marked the emergence of new issues that would affect plan investments. [January 2008]

IRS Provides Guidance on Reporting and Withholding
In what is becoming an annual ritual, the IRS delayed the requirement for companies to report nonqualified deferred compensation (NQDC) plan deferrals on Forms W-2 and 1099 for another year. [November 2007]

House Passes Tax Act
On October 25, House Ways and Means Chairman Charles Rangel (D-New York) introduced the Tax Reduction and Reform Act of 2007, which he describes as the most comprehensive tax legislation since the Tax Reform Act of 1986. The bill would permanently repeal the alternative minimum tax (AMT), treat most tax-carried interest as ordinary income, modify the unrelated-business-income tax rules and reduce the corporate tax bill.  [November 2007]

Summary of 409A Compliance Deadline Extensions
During the past few months, the IRS has issued three notices extending the deadlines for complying with various rules under section 409A. Because the guidance has been issued piecemeal and the effective date for the final regulations has been delayed, it is difficult to reconcile all the implications.  [November 2007]

The Results Are In: FAS 123 Option Assumptions
Fair values as a percentage of underlying stock values dropped from 39 percent in 2004 to 33 percent in 2006 among the FORTUNE 1000, largely because of lower expected volatility. The overwhelming majority of these companies – 85 percent -- used the Black-Scholes formula to value their options – only 14 percent used the more complicated lattice model (1 percent used both). Expected option life assumptions generally have remained very stable from year to year.  [November 2007]

IRS Releases 2008 Benefit Limits
The IRS has announced the annual cost-of-living and statutory adjustments of various dollar limits for employee benefit plans.  [November 2007]

Kerry/Emanuel Legislation Would Prohibit Offshore Deferred Compensation
Senator John Kerry (D-Massachusetts) and Representative Rahm Emanuel (D-Illinois) have introduced legislation that would prohibit offshore deferred compensation. Under the Offshore Deferred Compensation Reform Act, compensation deferred under a nonqualified deferred compensation (NQDC) plan of a foreign corporation would be treated as taxable income unless there was a substantial risk of forfeiture.  [October 2007]

Legislation Would Change Tax Treatment of Stock Options
Senator Carl Levin (D-Michigan) has introduced legislation to change the corporate tax treatment of stock options. Under the Ending Corporate Tax Favors for Stock Options Act (S.2116), companies could not deduct more than the amount they had claimed as an expense against earnings, and the expense would have to be recognized and deducted in the same period. Stock options could no longer be considered performance-based compensation and would be subject to the $1 million compensation limit. [October 2007]

New Legislation Would Link Stock Option Accounting and Tax Rules
Senator Carl Levin (D-Michigan) introduced the Ending Corporate Tax Favors for Stock Options Act (S.2116) on September 28.  [October 2007]

SEC Issues Comment Letters on Executive Compensation Disclosures
On August 21, the Securities and Exchange Commission (SEC) asked the CEOs of roughly 300 large public companies to submit additional information for their fiscal year 2007 Compensation Discussion and Analysis (CDA) and proxy disclosures by September 21. While many of the SEC’s comments may not warrant a restatement of either the proxy or the company’s 2007 10-K, they suggest a significant gap between what the SEC expected and what was filed.  [October 2007]

2007 Proxy Disclosures of CEO Pay – Some Observations
Companies had to disclose significantly more information about executive pay in their latest proxies than ever before. To gain greater insight into the current state of executive compensation and lay the groundwork for future trend analyses, Watson Wyatt studied the first proxy disclosures under these new rules, focusing on 690 of the largest U.S. companies (FORTUNE 1000 companies that were the earliest filers of their 2007 proxy statements).  [October 2007]

Investment Issues on Congress’ Radar Screen
Recent publicity surrounding private equity firms, carried interest and hedge funds has drawn legislative attention to those issues. Key lawmakers have indicated that legislation is unlikely to advance in 2007, but the issues could move up the legislative agenda in 2008. Any new tax or disclosure rules for these investments could have significant implications for retirement plans.  [September 2007]

Benefits Legislation Active as 2007 Session Hits Midpoint
As Congress headed into the July 4 recess, compensation and benefits were high on the legislative agenda. The focus is expected to last through the year, with health care likely to play a role in the presidential elections as well. After the prolonged debate preceding enactment of the Pension Protection Act of 2006 (PPA), retirement issues slipped down the agenda a few notches. However, Congress enacted some technical corrections to the PPA and is discussing others, as well as retirement savings, 401(k) fees, hedge fund disclosures and other retirement matters. [August 2007]

A Reasonable Approach to Severance and Change-in-Control Payments
Watson Wyatt’s executive compensation consultants are advising clients to rethink their severance and change-in-control provisions and, when warranted, to bring them into closer alignment with their purpose and shareholder interests.  [August 2007]

Senate Subcommittee Holds Hearing on Taxation of Stock Options
On June 5, the U.S. Senate Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations held a hearing on executive stock options. The hearing focused on the mismatch between the expensing of stock options for financial reporting purposes and the tax treatment of those options.  [July 2007]

Treasury Issues Final Regulations on 409A NQDC Rules
The U.S. Department of Treasury and the IRS recently released final regulations addressing nonqualified deferred compensation (NQDC) plans under section 409A. The regulations provide voluminous guidance — 397 pages worth — on a variety of qualification and other issues pertaining to NQDC plans. [June 2007]

Executive Compensation Provisions Dropped From Minimum Wage Package
Provisions to cap annual deferrals under nonqualified deferred compensation (NQDC) arrangements and expand the number of workers covered by the $1 million cap on executive compensation were dropped from the minimum wage package.  [May 2007]

House Approves “Say for Pay” Legislation
On April 20, the House approved the Shareholder Vote on Executive Compensation Act (H.R.1257) by a vote of 269-134. The “say for pay” legislation would give shareholders an annual, nonbinding vote on the executive compensation packages disclosed in corporate proxy statements. It would also give them a nonbinding advisory vote on golden parachute packages in some circumstances involving negotiations to buy or sell the company.  [May 2007]

Some 2007 Proxy Statements Falling Short of New SEC Guidelines
In a recent speech before the Corporate Counsel Institute, Securities and Exchange Commission (SEC) Chairman Christopher Cox warned filers that enforcement of the SEC’s plain-English requirement for proxy statements will become increasingly strict during the coming year, although the commission is granting filers some leeway during the transition. The SEC adopted new rules last year to give investors a clearer and more complete picture of executive compensation. [April 2007]

Executive Compensation Under Discussion in Minimum Wage Debate
Increasing the minimum wage is a priority for the new Democratic majority in Congress. Although both House and Senate Democrats want a higher minimum wage, politics have driven the chambers to take different approaches.  [February 2007]

SEC Amends Disclosure Rules for Stock and Option Grants
On December 22, 2006, the Securities and Exchange Commission (SEC) adopted interim final rules for the disclosure of executive compensation. The new rules make the reporting of stock and option awards in the Summary and Director Compensation Tables comparable with their accounting treatment under Financial Accounting Statement (FAS) 123(R).  [February 2007]

How Will FASB’s Accounting Changes Affect Shareholders’ Equity and Credit Ratings?
On September 29, 2006, the Financial Accounting Standards Board (FASB) released its Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158). SFAS 158 requires firms to put the net financial status of their postretirement plans on their balance sheet, and eliminates all smoothing of actuarial gains and losses in the funding position that flows into the other comprehensive income section in shareholders’ equity.  [December 2006]

Meeting the Challenges of Drafting a Compensation Discussion and Analysis
As companies prepare their compensation disclosures under the Securities and Exchange Commission’s (SEC’s) new reporting regime, questions arise about the best approach to creating the Compensation Discussion and Analysis (CD&A). To comply with the new rules, companies need to understand exactly what the SEC expects to find in the CD&A.  [November 2006]

PPA Combines Stricter Rules With New Savings Opportunities for Defined Contribution Plans
The Pension Protection Act of 2006 offers defined contribution plan sponsors new opportunities within a more demanding regulatory framework. The act permanently extends important retirement savings and IRA provisions that were scheduled to expire in 2010, and endorses and encourages automatic enrollment arrangements. [October 2006]

PPA Delivers Good News for Cash Balance and Other Hybrid Plans
The Pension Protection Act clarifies — primarily prospectively — that cash balance and other hybrid defined benefit plans are not inherently age discriminatory. The act clarifies the age-discrimination standard for defined benefit plans in general and establishes new rules for “applicable defined benefit plans.”  [October 2006]

IRS Finalizes Heinz Anti-Cutback Regulations
The IRS has issued final anti-cutback regulations that adopt the U.S. Supreme Court’s ruling in Central Laborers’ Pension Fund v. Heinz. In that case, the court ruled that ERISA’s anti-cutback rule prohibits any change to a pension plan’s suspension-of-benefits rules that would reduce benefits for employees who continued working after retirement (see Watson Wyatt Insider, August 2004). [October 2006]

Ten Key Points About the SEC’s New Disclosure Rules
On August 11, 2006, the Securities and Exchange Commission published 436 pages of executive compensation proxy disclosure rules. Companies must comply with those rules in their proxy statements for fiscal years ending on or after December 15, 2006. [October 2006]

Court Rules IBM’s Cash Balance Plan Is Not Age-Discriminatory
On August 7, the Seventh Circuit Court of Appeals ruled that IBM’s cash balance plan is not inherently age-discriminatory. In a strongly worded decision, the court rejected arguments against hybrid plans, specifically that: (1) compound interest is age-discriminatory, and (2) the accrual rate of the normal retirement annuity benefit is the only standard for judging age discrimination. [September 2006]

SEC Finalizes Revised Executive Compensation Proxy Disclosure Rules
The Securities and Exchange Commission voted unanimously to adopt a sweeping overhaul of proxy disclosures for executive compensation. The new disclosures will give shareholders a far more complete picture of compensation paid and payable to the CEO, the CFO and the three highest-compensated named executive officers. [September 2006]

SEC Finalizes Revised Executive Compensation Proxy Disclosure Rules
The Securities and Exchange Commission (SEC) voted unanimously to adopt a sweeping overhaul of proxy disclosures for executive compensation. The new disclosures will give shareholders a far more complete picture of compensation paid and payable to the CEO, the CFO and the three highest-compensated named executive officers (NEOs).  [August 2006]

FASB to Require Pension Obligations Include Future Salary Estimations
The Financial Accounting Standards Board decided on July 12, 2006, that its new rules on postretirement benefit accounting will require pension plan sponsors to report benefit obligations based on estimated future salary increases. [July 2006]

IRS Proposes Regulations on Dependent Care Expenses
The IRS has proposed new regulations for individual tax returns that will also affect employer-provided dependent care assistance programs (DCAPs), because the IRS applies the same definitions of “qualifying individual” and “employment related expenses” to both.  [June 2006]

GAO Releases Study on CDHPs
The U.S. Government Accountability Office’s (GAO’s) recent study of consumer directed health plans (CDHPs) examined their prevalence, funding, use and prospects. The study found that the number of CDHP enrollees is rising — from roughly 3 million in January 2005 to between 5 million and 6 million in January 2006.  [June 2006]

Sample Plan Amendment for Roth Elective Deferrals
In Notice 2006-44, the IRS provides a sample plan amendment for plan sponsors that want to provide for designated Roth contributions in their 401(k) plans.  [June 2006]

ERISA Guidance on Mutual Fund Settlement Proceeds
The U.S. Department of Labor (DOL) has released Field Assistance Bulletin (FAB) 2006-1, providing guidance on mutual fund settlement proceeds.  [June 2006]

IRS Improves Employee Plans Compliance Resolution System (EPCRS)
Rev. Proc. 2006-27 describes the newest IRS compliance resolution procedures for employee plans. [June 2006]

DOL Updates Voluntary Fiduciary Correction Program
The DOL has updated the Voluntary Fiduciary Correction Program (VFCP), which allows plan officials to correct certain ERISA violations without being subject to an enforcement action. Plan officials report corrected violations to the regional offices of the DOL’s Employee Benefits Security Administration (EBSA). [June 2006]

DOL Releases Updated PTE Concerning Interest-Free Loans to Employee Benefit Plans
The DOL has updated a prohibited transaction class exemption (PTE 80-26) regarding certain interest-free loans to employee benefit plans. The DOL eliminated the three-day duration requirement for certain loans and now requires a written agreement for loans whose duration exceeds 60 days. [June 2006]

DOL Releases Updated PTE Concerning Interest-Free Loans to Employee Benefit Plans
The Department of Energy (DOE) has announced that it will no longer cover the cost of defined benefit (DB) pensions for its contractors’ new employees. Under the new policy, the DOE will reimburse contractors only for defined contribution (DC) plan benefits and will significantly restrict reimbursements for contributions to such plans. Although the DOE will continue reimbursing contractors for pensions provided to existing employees, reimbursements will be subject to prohibitive new limits on the value and types of benefits provided. [June 2006]

IRS Releases Final Revisions to Relative Value Regulations
When plan participants become eligible for their pensions, they generally must choose from several optional forms of payment, typically including a qualified joint and survivor annuity (QJSA). Optional forms of payment are usually equal in value. However, differences may arise from less-than-full actuarial reductions for longevity or surviving spouse benefits, mandated actuarial assumptions or simplified actuarial factors. [May 2006]

Watson Wyatt Comments on the SEC’s Proposed Disclosure Regulations
The Securities and Exchange Commission (SEC) recently proposed new rules for disclosing executive compensation to make compensation information easier to find, understand and compare. [April 2006]

SEC Proposes New Disclosure Rules for Executive Compensation
Under the Securities and Exchange Commission's recent proposal, companies would have to disclose far more details about the pay and perks provided to named executive officers. [February 2006]

Rethinking Deferred Compensation for Tax-Exempt and Governmental Employers
The new section 409A rules — along with more aggressive IRS enforcement — will require tax-exempt and government sponsors of section 457(f) plans to review their existing deferred compensation plans and to consider new plan designs carefully. [January 2006]

Stock Options and SARs Under the New 409A Regime
The regulations recently proposed under section 409A have broadened the definition of nonqualified deferred compensation (NQDC) to encompass virtually all equity or equity-based grants not covered by a specific exception. Fortunately, most NQDC can be crafted to either qualify for an exception or comply with section 409A. In some situations, however, seemingly innocuous designs or design changes could unwittingly run afoul of the new rules, with unfavorable tax results. [November 2005]

Treasury Issues Proposed Regulations on Deferred Compensation
The U.S. Department of the Treasury and the IRS recently issued proposed regulations under section 409A, which governs plans and arrangements that provide nonqualified deferred compensation. [October 2005]

Technical Corrections Act Introduced
Senate Finance Committee chair Charles Grassley (R-Iowa), Finance Committee ranking member Max Baucus (D-Montana), and House Ways and Means Committee chair William Thomas (R-California) recently introduced the Tax Technical Corrections Act of 2005. [September 2005]

Delaware Court Finds Disney Board Did Not Violate "Business Judgment" Standard in Ovitz Case
A Delaware court recently ruled that Walt Disney's officers and directors did not violate their fiduciary duty in the hiring and firing of former President Michael Ovitz. [September 2005]

Cox's Nomination as SEC Chair May Affect Executive Compensation Initiatives
President Bush's nomination of Representative Christopher Cox to succeed outgoing Securities and Exchange Commission chairman William Donaldson could affect the future of important SEC executive compensation initiatives. [July 2005]

IRS Clarifies Corporate Deduction Limit for Executives' Personal Aircraft Use
In the executive compensation world, the American Jobs Creation Act (AJCA) is best known for substantially revamping the tax rules that govern nonqualified deferred compensation. [July 2005]

SEC Delays Effective Date for Expensing Stock Options
Last month, U.S. companies received two important — and mostly welcome — messages from the Securities and Exchange Commission (SEC) regarding the new stock option accounting rules under FAS Statement No. 123R. [June 2005]

IRS Allows Grace Period for Flex Plans
Employers that provide cafeteria plans may now establish a two-and-one-half-month grace period for participant claims, under a new rule released by the IRS last month. [June 2005]

Treasury Provides Initial Guidance on New Rules for Nonqualified Plans
Companies now have a partial roadmap for implementing the changes made by new section 409A of the Internal Revenue Code, which was added by the American Jobs Creation Act of 2004. [February 2005]

Reshaping Executive Compensation: Institutional Shareholders Offer Ideas for Improvement
Executive compensation is as controversial as ever — from trials over allegedly excessive severance payments to ongoing criticism of ultra-high pay levels and putative lack of pay for performance. [February 2005]

Reshaping Executive Compensation: Institutional Shareholders Offer Ideas for Improvement
Executive compensation is as controversial as ever — from trials over allegedly excessive severance payments to ongoing criticism of ultra-high pay levels and putative lack of pay for performance. And while corporate America and its shareholders thrive, large institutional shareholders continue to press for improvement.  [January 2005]

FASB Issues Revised Statement on Share-Based Plans: Option Expensing to Begin in Mid-2005
On December 16, 2004, the Financial Accounting Standards Board (FASB) published FASB Statement No. 123 (revised 2004), Share-Based Payment. Statement 123(R) provides comprehensive guidance on how to recognize the compensation cost of share-based payment transactions on company financial statements. [January 2005]

SEC's Beller's Perspective on Role of Compensation Committee and Proxy Disclosure Requirements
Alan L. Beller, director of the U.S. Securities and Exchange Commission's (SEC) Division of Corporation Finance, recently shared his views on how companies should go about disclosing executive compensation on their proxies and how compensation committees can ensure that executive compensation serves the interests of shareholders. [December 2004]

New Rules Ahead for Nonqualified Plans
President Bush signed the American Jobs Creation Act (H.R.4520) into law on October 22, 2004. [November 2004]

American Jobs Creation Act Has Broad Range
In addition to the highly publicized new rules for nonqualified deferred compensation plans, the American Jobs Creation Act includes several other compensation and benefit provisions. [November 2004]

IRS Puts a Stop to Parking Double-Dipping
In Revenue Ruling 2004-98, the IRS shuts down an abusive employment tax arrangement in which employers were essentially reimbursing employees twice for the same parking expense. [November 2004]

FASB Works Toward Finalizing Exposure Draft
On March 31, 2004, the Financial Accounting Standards Board (FASB) released Share-Based Payment, its exposure draft (ED) on share-based payment transactions, which would require companies to expense their stock options. [October 2004]

FASB Makes Tentative Decision on Stock Option Awards with Graded Vesting
The Financial Accounting Standards Board (FASB) continues to make important (tentative) decisions related to stock compensation.  [September 2004]

FASB Re-Examines Key Decisions in Exposure Draft
The Financial Accounting Standards Board (FASB) met August 4 to begin re-examining key decisions in the exposure draft on Share-Based Payments.  [September 2004]

Nonqualified Deferred Compensation Legislation Has Broad Implications
On June 17, the House approved the American Jobs Creation Act (H.R.4520), which would make several significant changes to the rules on nonqualified deferred compensation (NQDC). [August 2004]

Senate Approves New Requirements for Nonqualified Deferred Compensation Plans
The Jumpstart Our Business Strength (JOBS) Act (S.1637) would impose new limits on nonqualified deferred compensation arrangements, restrict the deferral of gains from employer securities and make other changes that would affect executive compensation. [June 2004]

House Subcommittee Approves Bill to Delay Stock Option Accounting Change
On May 12, the House Financial Services Committee subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises approved legislation to delay the Financial Accounting Standards Board’s proposal to require companies to expense stock options. [June 2004]

FASB Releases Exposure Draft to End Favorable Stock Compensation Accounting
On March 31, the Financial Accounting Standards Board (FASB) released Share-Based Payment, its exposure draft (ED) on share-based payment transactions. [April 2004]

Last Call for Preferable Stock Option Accounting
Absent any last-minutes surprises, 2004 will be the final year of no accounting expense for stock options. The Financial Accounting Standards Board’s tentative decision is for the new standard to become effective for fiscal years beginning after December 15, 2004. [January 2004]

FASB Ready to Level Playing Field for Stock Options
The Financial Accounting Standards Board plans to complete its deliberations on the equity-based compensation project this quarter and to issue an Exposure Draft in early 2004 and a final statement later in the year. [November 2003]

Comparison of NYSE and NASDAQ Shareholder Approval Requirements for Equity Compensation Plans
The SEC approved the NYSE and NASDAQ proposals to change their respective requirements for the shareholder approval of equity compensation plans. [August 2003]

New Rules for Nonqualified Plans on the Horizon
Efforts to impose new restrictions on nonqualified deferred compensation plans and certain stock compensation arrangements are gaining momentum in Congress. [June 2003]

New Study on Disclosure of Stock Option Expense: Substance Matters More Than Form
Requiring companies to recognize stock-based compensation as an expense may not exert the downward effect on stock prices that many have feared, according to a recent analysis by Watson Wyatt Worldwide. [June 2003]

Congress Seeking to Help Activated Reservists
The Department of Defense (DoD) has called up more than 200,000 military reservists for the war in Iraq — and additional call-ups will likely be necessary to maintain U.S. forces in Iraq for post-war activities.  [May 2003]

FASB Makes Early, Critical Decision to Expense
In the Financial Accounting Standards Board’s (FASB) first meeting on the stock-based compensation project on April 22, the Board reached a key tentative conclusion that stock-based compensation (SBC) should be recognized as an expense and that the stock grants should be recorded at their fair value as measured on the grant date.  [May 2003]

Joint Tax Committee Recommends Pension, Compensation Changes
Following Enron’s collapse, the media and the 2002 congressional session focused considerable attention on the fallout — on Enron’s 401(k) plan participants in particular and on employer stock in 401(k) plans and other 401(k) issues more generally. [April 2003]

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. [February 2003]

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. [February 2003]

Increased Scrutiny of Executive Pay at Tax-Exempt Employers
The IRS recently released two Technical Advice Memoranda concerning section 4958 taxes on excess benefit transactions, reflecting increased IRS scrutiny of tax-exempt organizations’ pay practices. TAM 200244028 emphasizes how important it is for board compensation committees at tax-exempt organizations to rely upon appropriate pay data in establishing the pay level of certain executives, referred to as disqualified persons.  [January 2003]

Compensation at the Crossroads: The Stock Option Debate
Accounting scandals have focused legislative, media and corporate attention on accounting for stock options, and there have been calls for new laws and revamped accounting rules. [December 2002]

Majority of Employees Believe They Can Find Better Pay/Benefits at Other Companies, WorkUSA® 2002 Survey Shows
Inadequate communication about the true value of their compensation and benefits has led many workers to conclude that the grass may be greener at other organizations when it comes to rewards, according to the new Watson Wyatt WorkUSA® 2002 Survey. [November 2002]

Executive Compensation and Nonqualified Plans: What's Ahead?
Executive compensation is facing intense scrutiny today from all quarters: political, media, corporate boards and even executives themselves.  [October 2002]

Side-by-Side Comparison of NYSE and NASDAQ Corporate Accountability Standards
 [September 2002]

Executive Compensation Gains Momentum on Capitol Hill
Stock options, deferred compensation and other executive compensation issues are receiving considerable attention on Capitol Hill. [August 2002]

IRS Extends Employment Taxes on Statutory Stock Options Moratorium
The IRS recently released Notice 2002-47, which continues the IRS moratorium on collecting FICA and FUTA taxes on statutory stock options.  [August 2002]

Landmark Case Provides FICA Tax Refund Opportunity
In CSX Corp. v. U.S., a Court of Federal Claims recently held that certain Supplemental Unemployment Compensation payments are not FICA wages. This is an important decision, because employers that downsized and paid supplemental unemployment compensation in 1999 or later most likely treated those payments as FICA wages and paid FICA taxes. [June 2002]

IRS Releases Section 457 Regulations: Problems for Discounted Options on Property
Earlier this month, the IRS issued proposed regulations on Section 457 deferred compensation plans. The most important provisions could put an end to nonprofit employers using nonqualified stock options as deferred compensation. [June 2002]

Congress Discusses Faster Reporting of Insider Stock Sales
Congress and the Securities and Exchange Commission (SEC) have taken aim at current rules that allow corporate insiders to report sales of company stock days — or even more than a year — after the transaction occurs. Lawmakers and securities regulators want faster reporting to both the government and the public. [April 2002]

Tight Labor Markets Are Just Around the Corner…Again
The February unemployment rate fell to 5.5 percent from its December high of 5.8 percent. As the economy moved into recession last fall — exacerbated by the terrorist attacks on September 11 — Watson Wyatt predicted that the U.S. labor markets would likely firm up again fairly quickly once the economy started to recover. [April 2002]

IRS Permits Retroactive Application of Certain EGTRRA Provisions; Issues Sample Plan Amendments
IRS Notice 2001-56 provides important guidance on effective dates for certain provisions in the Economic Growth and Tax Relief Reconciliation Act, while companion Notice 2001-57 provides model plan amendments to simplify the EGTRRA amendment process for employers. [October 2001]

Workforce Reductions: Strategies in Today's Market
The economic expansion of the past decade has clearly ended. Corporate profits have fallen over $80 billion during the first half of this year -- a 10 percent drop. Faced with diminishing profits, employers are scrambling to boost their bottom lines, employing strategies such as closing plants, discontinuing product lines and lowering dividend payouts. [October 2001]

Lesser-Known Tax Provisions Affect Employers, Too
The media has focused mostly on tax cuts and estate tax provisions, and the benefits community has been concerned primarily with the pension package. But the Economic Growth and Tax Relief Reconciliation Act also affects educational assistance, adoption assistance and other employer programs. [July 2001]

Stock Market Tumble Produces Unwanted Hit to Corporate Earnings
For the first time in many years, most of the major stock market indexes showed negative returns for 2000. [February 2001]

IRS Provides Payroll Tax Relief for Stock Plans
The IRS recently released Notice 2001-14, providing interim guidance relating to FICA, FUTA and income tax withholding on statutory options. [February 2001]

A Story of a Family-Friendly Employer
This family-friendly employer provided employees with a calendar year, full-blown cafeteria plan, chock full of health care benefits, group-term life insurance and a dependent care assistance plan [June 2000]

President Signs Stock Options Bill
The Worker Economic Opportunity Act exempts stock option plans and certain other stock ownership programs from the overtime requirements of the Fair Labor Standards Act [June 2000]

Looking to Improve HR Outcomes? Try Internal Benchmarking
Your firm has completed the cost management basics: managed care, carve-outs, flex benefits and a paid time off (PTO) plan. What’s your next step for further improving benefit costs, absenteeism, workers’ compensation experience and employee health?  [January 2000]

FASB Releases Proposed Interpretation on Stock Compensation
Nearing the final stage of a project that began in August 1996, the Financial Accounting Standards Board (FASB) released its Proposed Interpretation of APB Opinion No. 25 (Exposure Draft 195-B), Accounting for Certain Transactions Involving Stock Compensation, on March 31.  [May 1999]

SEC Broadens Rule 701 Registration Exemption for Stock Compensatory Plans
The Securities and Exchange Commission adopted amendments to Rule 701 under the Securities Act of 1933, which provides an exemption from registration for securities issued by non-reporting companies pursuant to compensatory arrangements.  [May 1999]

Stock Options: Shareholder Gain or Loss?
Employee stock option plans have become increasingly controversial. Stock options motivate executives and other employees, but they also pose a significant potential dilution problem to existing shareholders. As options are exercised, the shares are issued and counted as outstanding. [January 1999]

FASB Continues Its Tinkering with Stock Options
The Financial Accounting Standards Board (FASB) is making progress on its project on how to account for stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees. Key tentative decisions to date would (1) preserve favorable accounting for §423 Employee Stock Purchase Plans, and (2) apply variable plan accounting to option repricings, which would increase the compensation expense and therefore change the practice of option repricings. FASB plans to publish an exposure draft of a proposed Technical Bulletin in early 1999. [November 1998]

Big-Ticket Items Stall, Other Benefits Sail through Congress
As the 105th Congress struggles over broad health-care quality issues and Social Security reform, smaller benefits-related provisions have been moving along. Provisions to enhance transportation benefits, extend educational assistance and repeal a Tax Court decision relating to deferred compensation have passed Congress and affect certain distributions from defined contribution plans. [August 1998]

Options on Discounted Property Provide Creative Deferral Solutions
For many tax-exempt organizations, designing deferred compensation plans has been a frustrating ordeal since they became subject to section 457's restrictive deferral rules under the Tax Reform Act of 1986.  [May 1998]