November 8, 2012
Authored by: benefitsbclp
It’s that time of year again! Time to ensure year-end executive compensation deadlines are satisfied and time to plan ahead for 2013. Below is a checklist of selected executive compensation topics designed to help employers with this process.
I. 2012 Year-End Compliance and Deadlines
□ Section 409A – Amendment Deadline for Payments Triggered by Date Employee Signs a Release
It is fairly common for an employer to condition eligibility for severance pay on the release of all employment claims by the employee. Many of these arrangements include impermissible employee discretion in violation of Section 409A of the Internal Revenue Code because the employee can accelerate or delay the receipt of severance pay by deciding when to sign and submit the release. IRS Notice 2010-6 (as modified by IRS Notice 2010-80), includes transition relief until December 31, 2012 to make corrective amendments to plans and agreements.
Generally, the arrangement may be amended to either (1) include a fixed payment date following termination, subject to an enforceable release (without regard to when the release is signed), or (2) provide for payment during a specified period and if the period spans two years, payment will always occur in the second year. We recommend employers review existing employment, severance, change in control and similar arrangements to ensure compliance with this payment timing requirement. The December 31, 2012 deadline for corrective amendments is fast approaching.
□ Compensation Deferral Elections
Compensation deferral elections for