Wednesday, February 16, 2011

2011 Cost-of-Living Adjustments for Pension Plan and Other Limits; Transportation Fringe Parity Extended One Year by Tax Relief Act

Charles C. Shulman, Esq., LLC
Employee Benefits, Employment & Executive Compensation Law
www.ebeclaw.com – www.EmployeeBenefitsLaw.info

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NJ Office & Mailing Address

632 Norfolk St., Teaneck, NJ 07666

NJ Tel - 201-357-0577

(rings in office & on cell)

Fax - 201-836-4847

NY Office:

345

Seventh Ave.

, 21 Fl., New York, NY

NY Tel – 212-380-3834

E-mail - cshulman@ebeclaw.com

Admitted in NY & NJ

EBEC (Employee Benefits / Executive Compensation) Law Update

October 28, 2010
Updated Dec. 18, 2011

2011 Cost-of-Living Adjustments for Pension Plan and Other Limits;
Transportation Fringe Parity Extended One Year by Tax Relief Act

1. 2011 COLA for Pension Plan Limits Unchanged or Changed Slightly. This morning the IRS announced in IR-2010-108 that because the cost of living for the quarter ending Sept. 30, 2010 was lower than the cost of living in quarter ending Sept. 30, 2008 (although it was slightly higher than the cost of living for quarter ending Sept. 30, 2009), the pension plan limits for 2011 adjusted by IRC § 415(d) will remain unchanged at the 2010 and 2009 level. Certain other limits relating to retirement plans adjusted by other provisions will increase slightly.

Pension Plan Limits Adjusted by IRC § 415(d)	2011 Amounts(Same as 2010 & 2009)
Annual benefits limit for defined benefit plans – Code § 415 (b)	$195,000
Annual contributions limit for defined contribution plans – Code § 415(c)	$49,000
Elective deferral max for 401(k), 403(b) & 457(b) plans – Code § 402(g)	$16,500
Elective deferral limit for SIMPLE plans – Code § 408(p)	$11,500
Age 50 catch-up contributions – Code § 414(v)	$5,500
Highly-compensated employee threshold – Code § 414(q)	$110,000
Annual compensation limit – Code § 401(a)(17)	$245,000
Key-employee threshold for top heavy plan - § 416(i)	$160,000
ESOP account balance for 5-year / 1-year distribution rule under IRC § 409(o)(1)(C)(ii)	$985,000 & $195,000

EXECUTIVE COMPENSATION PROVISIONS OF DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2010

Charles C. Shulman, Esq., LLC
Employee Benefits, Employment & Executive Compensation Lawwww.EBEClaw.com

<><>

NJ Office & Mailing Address

632 Norfolk St., Teaneck, NJ 07666

NJ Tel - 201-357-0577

(rings in office & on cell)

Fax - 201-836-4847

NY Office:

345 Seventh Ave., 21 Fl., New York, NY 10001

NY Tel – 212-380-3834

E-mail - cshulman@ebeclaw.com

Admitted in NY & NJ

EBEC (Employee Benefits / Executive Compensation) Law Update

[December 15, 2010]

EXECUTIVE COMPENSATION PROVISIONS OF DODD-FRANK
WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, P.L. 111-203, H.R. 4173, signed July 21, 2010 (“Dodd-Frank Act” or “Act”), contains say-on-pay and other shareholder-accountability executive compensation proxy rules.

1. Say-on-Pay. Section 951 of Dodd-Frank Act adds new § 14A(a) (15 USC §78n-1(b)) to the Securities Exchange Act of 1934 that a non-binding shareholder vote on executive compensation must be held every 1,2 or 3 years (with frequency elected in a separate shareholder vote at least once every 6 years).

The “say-on-pay” vote is on compensation of named executive officers as disclosed in the executive compensation disclosure of the proxy.

The say on pay vote is non-binding – it is advisory only – and it does not create any additional fiduciary duties. Previously, optional say on pay votes required a preliminary proxy. A preliminary proxy will not be required for mandatory say on pay vote, according to proposed rules as discussed below.

2. Say-On-Golden Parachutes. Section 951 of the Dodd-Frank Act adds § 14A(b) to the Securities Exchange Act that a proxy or consent solicitation with a shareholder vote to approve a transaction, requires disclosure and a separate non-binding vote for any agreements with named executive officers relating to compensation (present, deferred or contingent) that is based on or relates to an acquisition, merger, consolidation, sale or other disposition of substantially of all the assets (“golden parachutes”) and the total of such compensation that may be paid out.

3. Effective Date. The various shareholder vote requirements such as say on pay, frequency of vote and say on golden parachute become effective on the first shareholder meeting occurring on or after January 21, 2011 (6 months after enactment of Dodd-Frank Act). No rulemaking is required to trigger the effective date.

4. Proposed Regulations on Say-on-Pay. The SEC released proposed rules and amendments to rules relating to the above say-on-pay and say-on-golden parachute requirements of the Dodd-Frank Act. 17 CFR Parts 229, 240 and 249, 75 Fed. Reg. 66590 (Oct. 28, 2010). (All references below to regulations are to these proposed regulations and proposed amendments to regulations.)

a. Annual Proxies. Say-on-Pay is only required in proxies for election of directors.

b. Say on all NEO 402 Pay. Vote of say-on-pay is for all Item 402 compensation for named executive officers (including CD&A, tables are other narrative disclosure under Item 402 Rule 14(a)-21(a), 17 CFR § 240-14a-21(a). This vote is not required for director compensation.

c. Vote. The vote is on approval of compensation of executives as disclosed under Item 402 of Reg. S-K.

d. Vote on Frequency of Say-on-Pay Vote. Choice of voting frequency is one year, two years or three years (and shareholder can also abstain). Rule 14a-21(b).

e. No Preliminary Proxy. No preliminary proxy is required for shareholder say-on-pay vote or frequency vote. Rule 14a-6(a).

f. Compensation Discussion & Analysis. Item 402(b) is changed so that disclosure is required in CD&A as to whether and how the company’s compensation policy takes into account the prior say on pay vote.

5. Proposed Regulations on Say on Golden Parachute. These proposed rules also govern say on golden parachutes.

a. Separate Vote in Transaction Proxy. Proposed rules provide that in a proxy or consent solicitation to approve an acquisition, merger, consolidation or sale of substantially all of assets, a separate shareholder vote is required to approve any type of compensation (whether present, deferred or contingent) that is based on or relates to the transaction. 17 CFR § 240.14a-21(c) & § 229.402(t)(1)

b. Separate Golden Parachute Vote Not Required if Already Approved in Annual Proxy. The vote on golden parachutes is not required if such golden parachutes were already approved in the regular annual (or bi or tri-annual) proxy vote assuming the applicable 402(t) golden parachute chart has been included in the annual proxy. 17 CFR § 240.14a-21.

c. Golden Parachute Table. Golden parachute compensation disclosure, where required, shall include under proposed Item 402(t) a golden parachute compensation table with the named executive officers and the dollar value of cash severance, accelerated stock options, and other stocks awards, payments in cancellation of such awards, pension and deferred compensation benefit enhancements, prerequisites, tax reimbursements (such as 280G gross-ups) and other personal benefits, and any other compensation payable on account of the transaction. 17 CFR § 229.402(t).

d. Footnotes to Golden Parachute Table. Footnote should disclose each separate form of compensation and shall indicate if it is a single trigger or a double trigger. Even change in control compensation from broad-based plans must be disclosed to the extent it affects the named executive officers.

e. Narrative Golden Parachute Disclosure. Item 402(t)(3) requires narrative description of material factors applicable to the change in control payments in the chart, including conditions of payment, form of payment, noncompetes and confidentiality agreements.

6. Recovery of Erroneously Awarded Compensation – Expanded Clawbacks. Section 954 of the Dodd-Frank Act adds securities Exchange Act § 10D, which instructs the SEC to direct the listing exchanges to require of the listed companies:

a. Disclosure of the company’s policy regarding incentive compensation based on reported financial information; and

b. Recoupment (clawback) from any current or former executive officer of any incentive compensation paid during the past three years based on erroneous data if the company is required to restate the financials; the recoupment is for the excess of the amount of incentive compensation paid based on the erroneous financial information over what would have been payable under the corrected financial information.

Note that the Dodd-Frank Act clawback is broader than the Sarbanes-Oxley Act clawback in that under Dodd-Frank it applies to erroneous information whether or not there was misconduct, it goes back three years instead of 12 months and it applies to all executive officers not just named executive officers.

7. Compensation Committees and Compensation Consultant are Advisor Independence.

a. Compensation Committee Independence. Section 952 of Dodd-Frank Act adds §10C(a) of the Securities Exchange Act instructing stock exchanges to require that listed companies have compensation committee members who are Board members and are also “independent”. The respective stock exchanges will define independent considering compensation paid to the committee members (e.g. consulting or advisory fees) and whether the committee member is affiliated with the company.

A compensation consultant or other advisor may be selected only after the compensation committee has taken into account relevant factors determining independence including: (i) provision of other services to the company by the entity that employs the consultant or advisor; (ii) fees received from the company as a percentage of the total revenue of the entity that employs the consultant or advisor; (iii) policies of the entity employing the consultant or advisor; (iv) any business or personal relationship between the compensation committee and the consultant or advisor; and (v) any stock of the company owned by the compensation consultant or advisor.

b. Authority to Retain Compensation Consultants and Advisors. Section 952 also adds Securities Exchange Act §§ 10C(c) and (d) that a compensation committee may in its sole discretion retain a compensation consultant legal counsel or other advisors. The compensation committee will be directly responsible for appointment, compensation and oversight of the work of the consultant or advisor. (The annual proxy must disclose whether the compensation committee has engaged a compensation consultant and whether there are any conflicts of interest.)

c. Funding Section 10C(e) provides that the company shall provide appropriate funding for reasonable compensation of the committee’s compensation consultant and advisors.

d. Requirement of Listing Companies and Effective Date The Dodd-Frank Act provides that the SEC must adopt rules by 360 days after enactment (July 16, 2011) providing that securities exchanges shall prohibit security listing by companies not in compliance with these compensation consultant & advisor rules. § 10C(f).

8. Hedging Disclosure. The proxy must contain a policy regarding permissibility of employees or directors purchasing derivatives to hedge against equity grants. Section 955 of Dodd-Frank Act adding § 14(j) of the Securities Exchange Act.

9. Joint or Separate CEO & Chairman. Under § 972 of the Dodd-Frank Act rules are to be issued within 180 days of enactment (Jan. 17, 2011) requiring listed company proxies to disclose why CEO and Chairman are the same person or two separate people.

NOTICE 2010-80: RELIEF FOR PAYMENTS CONDITIONED ON EXECUTING RELEASES AND FOR § 409A CORRECTION PROGRAMS

Charles C. Shulman, Esq.
Employee Benefits, Employment & Executive Compensation Law
www.EBEClaw.com

<><>

NJ Office & Mailing Address

632 Norfolk St., Teaneck, NJ 07666

NJ Tel - 201-357-0577

(rings in office & on cell)

Fax - 201-836-4847

NY Office:

345 Seventh Ave., 21 Fl., New York, NY 10001

NY Tel – 212-380-3834

E-mail - cshulman@ebeclaw.com

Admitted in NY & NJ

EBEC (Employee Benefits / Executive Compensation) Law Update

December 6, 2010

NOTICE 2010-80:
RELIEF FOR PAYMENTS CONDITIONED ON EXECUTING
RELEASES AND FOR § 409A CORRECTION PROGRAMS

Notice 2010-80 - Relief With Respect to Correction Methods and Payment Conditioned on Executing Release. Notice 2010-80, issued on Nov. 30, 2010, provides certain relief with respect to the IRC § 409A correction methods described below, as well as with respect to payments conditioned on employment-related action of the employee such as executing a release, as summarized below.

v IRS Notice 2008-113 described certain self-correction methods for § 409A operational failures, provided the corrections are made in the year of failure or in certain cases in the first or second year following the year of failure. (The notice also provided certain transitional relief for operational failures occurring before 2008.) See Feb. 28, 2009 client memo.

v IRS Notice 2010-6 allowed taxpayers to voluntarily correct many documentary failures under IRC § 409A, including (i) impermissible definitions of payment events, (ii) impermissible payment periods, payment events or payment schedules, (iii) lack of six-month delay, (iv) impermissible initial deferrals, etc. This notice also provides certain transition rules for corrections on or prior to Dec. 31 2010 or for certain corrections on or prior to Dec. 31, 2011.

v Notice 2010-6 also provides relief for payments conditioned on employment-related action of the employee such as executing a release, non-solicitation agreement or non-compete agreement, that correction can be made before the permissible payment event occurs by removing the ability of the employee to delay or accelerate the timing of the payment as a result of his or her actions, and fixing the payment date at 60 (or 90) days after the payment event (with certain other conditions, as outlined below). See March 7, 2010 client memo for more information.

Severance Conditioned on Executing Release – Expanded Relief. When payment of severance is conditioned on the employee’s signing a release of claims (including age discrimination waivers), and the employee can sign the release at any time, this could cause the severance to fail to be a short-term deferral or to have or not have a fixed payment date as required by IRC § 409A.

One solution that practitioners have used is to provide a fixed deadline in which time to execute the release, e.g., the release must be executed and not revoked by the 60th (or 90th) day following termination, and the terms of the release would be agreed upon in advance. This way, the ADEA 21-day period to consider the release, or the 45-day period in connection with an exit incentive program or other employment termination program, and the 7 days to revoke can be satisfied before the expiration of that period, and the payment is to be made after executing the release at any time within a 60 (or 90) day period after termination. In addition, in order to avoid an employee being able to control the year of payment, a provision would also need to be added that if the 60 (or 90) day period begins in one taxable year and ends in the next taxable year the payment will automatically be pushed to the next taxable year.

The IRS had indicated informally and in Notice 2010-6, however, that such a solution may not work, because there would be an impermissible toggle by being able to have a different pay option depending on whether the employee executes the release prior to or after November 1. The solution the IRS suggested is to require is that regardless of whether the release is executed right away, the severance payment will only be made 60 (or 90) days after termination, provided an irrevocable release is in place by then. This solution is supported by Notice 2010-6 § VI.B, which provides a documentary correction that if payment is conditioned on the employee executing a release, correction can be made before the permissible payment event occurs by removing the ability of the employee to delay or accelerate the timing of the payment as a result of his or her actions, and fixing the payment date at 60 (or 90) days after the payment event.

v Note that much of the above requirements only apply if the severance arrangement is subject to § 409A, but if the severance can be paid within the short term deferral period (e.g., it has a safe harbor § 409A good reason definition) or within the two years two times pay exception for involuntary terminations, this would avoid application of § 409A and therefore it would not be subject to the toggle rule relating to § 409A payment events or the straddling of two years. The release would have a fixed deadline that must be executed and become irrevocable within e.g., 60 (or 90) days, and the severance would have to be paid in all events no later than 2-½ months (to ensure that it is a short-term deferral), or within two years if relying on that exception.

The IRS has retreated somewhat from its position requiring a fixed date, and has determined that the first solution – to set a 60 day (or 90 day) deadline for executing the release and receiving payment and to push the payment date to the next year if this period begins in one calendar year and ends in the next year – would also work. This position is set forth in Notice 2010-80 that payment of severance can be set as payable within a 60 (or 90) day period following the termination (the permissible payment event), assuming the release and non-revocation has occurred, and provided that if such 60 (or 90) day period begins in the employee’s first taxable year and extends into the employee’s second taxable year, the payment must be made in the second taxable year (or alternatively the payment can be set for the last day of the period as per the method described above).[1]

Transition Relief for Severance with Release through Dec. 31, 2012. Notice 2010-80 also modifies Notice 2010-6 by providing additional transition relief through December 31, 2012 for plans that contain failures involving payments dependent upon the employee executing a release (and the plan is eligible for correction by December 31, 2010 ), provided that any payments made after March 31, 2011 that could be paid during a period that begins in one taxable year and ends in the subsequent taxable year are made during the subsequent taxable year and provided further that to the extent any amounts remain deferred under the plan, the plan is amended to be compliant by no later than December 31, 2012.[2]

Certain Linked Plans and Stock Rights are Included in Documentary Corrections. Notice 2010-80 amends Notice 2010-6 to provide that the documentary corrections can be utilized: (i) by linked plans (nonqualified plans linked with qualified plans) with document failures if the linkage does not affect the time and form of payment of amounts under the plans; and (ii) by stock rights (stock options and stock appreciation rights) that were intended at the time of grant (or upon a modification pursuant to applicable transition relief) to be subject to and compliant with § 409A but that have a plan document failure.[3]

Relief Regarding Information and Reporting Requirements for Operational Corrections. Notice 2008-113 provides information and reporting requirements by the employee and employer to make the operational corrections. For example, with respect to same year corrections, Notice 2008-113 provides that the employer must attach to its federal income tax return for its taxable year in which the failure occurred a statement entitled “Section 409A Relief under Section IV of Notice 2008-113” with specific information about the correction, and the employer must provide to each affected employee a similar statement by the W-2 due date.[4] Notice 2010-80 amends this provision so that notice to the employee is not required for corrections in the same year of error.[5]

Relief Regarding Information and Reporting Requirements for Documentary Corrections. An employer with respect to any of the corrections in the notice must attach to its corporate tax returns and to the W-2’s and 1099’s for the year of failure an exhibit entitled “409A Document Correction Under § ___ of Notice 2010-6,” which must include certain information about the correction.[6] The affected employees must also be provided with a statement that the employee is entitled to the relief provided in the applicable provision in Notice 2010-6 with respect to a failure to comply with § 409A, and containing the above information about the correction, and that the employee must attach a copy of the statement to his or her income tax return for the taxable year in which the failure was corrected.[7] Notice 2010-80 modifies Notice 2010-6 to provide that this statement is not required to be furnished by the employer to the employees and is not required to be attached by the employees to their tax returns with respect to transition relief corrections that may be made prior to Dec. 31, 2010, 2011 or 2012, as applicable,[8] although the employer is still required to attach the statement to its return.[9]

Prompt Attention. If you are unsure if your documents or procedures need corrections, prompt attention is advisable, as certain of the transition rules for corrections end on December 31, 2010.

[1] Notice 2010-80 § III.B modifying § VI.B.2 of Notice 2010-6.

[2] Notice 2010-80 § III.C adding § VI.B.3 to Notice 2010-6.

[3] Notice 2010-80 § III.A.

[4] Notice 2008-113 § IX.

[5] Notice 2010-80 § III.H amending Notice 2008-113 § IX.

[6] Notice 2010-6 § XII.A. The attachment describing the documentary correction should set forth the name and tax identification number for each service provider affected by the failure, identification of the plan with the failure, a statement that the document failure is eligible for correction (and identifying the specific section of the notice) and stating the amount involved in the documentary error. Notice 2010-6 § XII.B.

[7] Notice 2010-6 § XII.C. The employee must attach to his or her tax return a copy of the above statement regarding the failure. § XIII.D.

[8] The transition relief corrections are in Notice 2010-6 § XI and in Notice 2010-6 § VI.B.3 (as added by Notice 2010-80).

[9] Sections III.E, F & G of Notice 2010-80 amending § XII of Notice 2010-6.

Enhanced Executive Compensation Disclosure: A Summary of SEC’s 2009 Rules

BNA PBR 8-4-09 Article Revised
to Reflect 12-23-09 Final Rules – 1/4/2010

Enhanced Executive Compensation Disclosure:
A Summary of SEC’s 2009 Rules

By Charles C. Shulman

Charles C. Shulman practices employee benefits and executive compensation law in New York and New Jersey. He can be reached at cshulman@EBEClaw.com

The Securities and Exchange Commission finalized amendments to its executive compensation and corporate governance disclosure rules that apply to proxy and information statements. This memo discusses amendments relating to disclosure of a company’s compensation policies, director and nominee qualifications, use of consultants, and method of reporting the value of stock awards in the Summary Compensation Table.

On December 23, 2009 the Securities and Exchange Commission published final rules, Proxy Disclosure and Solicitation Enhancements - Release No. 33-9052, 74 Fed. Reg. 68334 (Dec. 23, 2009). The rules were first proposed July 17, 2009. 74 Fed. Reg. 35,076 (July 17, 2009). The rules as finalized (i) amend the proxy disclosure (S-K) rules at 17 C.F.R. § 229 and other related rules to provide enhanced proxy disclosure regarding broad-based compensation policies, director qualifications, diversity, leadership structure, and compensation consultant additional fees; (ii) amend the proxy disclosure rules to record the value of stock awards in the Summary Compensation Table based on grant-date fair market value and to describe performance goals based on probable outcome of performance; (iii) require that the shareholder vote results be reported on Form 8-K (within four business days) rather than Form 10-K; and (iv) amend the proxy rules to provide that return of a blank proxy card is not a revocation, a soliciting person can round out its short slate by soliciting persons seeking minority representation on the board and certain other changes regarding proxy solicitation.

This summary discusses the amendments in (i) and (ii) above, which relate to director and executive compensation disclosure.

1. Narrative Disclosure of Company’s Compensation Policies and Practices and How They Relate to the Company’s Risk Management. Under prior proxy disclosure rules, the Compensation Discussion and Analysis (CD&A) section of the proxy needed to only discuss the compensation of the named executive officers (principal executive officer, principal financial officer, and the three other most highly compensated employees). Under the new 2009 amendments, the CD&A also has to discuss the company’s overall compensation policies for its employees in general even for nonexecutives, if the policies are reasonably likely to have a material adverse effect on the company. New Item 402(s).

In particular, discussion and analysis would typically be required for compensation policies and practices at a particular business unit that carries a significant portion of the company’s risk profile, or where compensation of a business unit is structured significantly different than other units. Id.

Issues that may need to be discussed in the CD&A include: (i) the design philosophy of compensation policies that would have the most effect on risk, (ii) considerations in structuring the compensation policies, (iii) how compensation policies relate to short-term risk, such as through clawbacks or mandatory bonus deferrals, and (iv) adjustments to compensation policies and practices that result from changes in risk profile; and (v) monitoring of compensation policies to determine if risk management objectives are being met with respect to incentivizing employees. Id.

Note: Smaller reporting companies that do not need CD&As are also exempt from providing this additional disclosure.

Note: This requirement to discuss the role of risk in compensation plans is intended to make compensation committee to consider how risk may play a role in incentive compensation, and to consider company-wide compensation plans, both of which have until now generally been considered outside the scope of compensation committees.

Note: The above rules are a clear example of how the executive compensation proxy disclosure rules have moved beyond disclosure and into shaping compensation policy.

2. Expanded Disclosure about Directors, Nominees and Executive Officers (Whether or not up for Reelection). The 2009 amendments expand the proxy rules to provide: (i) disclosure for directors, nominees and executive officers of their employment during the past five years, (ii) whether the entity they worked at is affiliated with the company, (iii) the directors and nominees’ experience or qualifications that led to the conclusion that the person is fit to serve on the board, (iv) if material, information about the director, nominee or executive’s areas of expertise and other relevant qualifications, (iv) disclosure of directorships of public companies in the past five years, and (v) for directors, nominees and officers, any prior business experience and level of responsibility within the past five years. Amendment to Item 401(e).

Disclosure of any legal proceedings involving directors, nominees or executive officers is lengthened by the 2009 amendments from 5 to 10 years. Item 401(f). The amendments also require disclosure of additional legal proceedings, including proceedings resulting from wire or mail fraud or fraud in any business proceeding based on violations of securities, banking or insurance laws, and sanctions or orders imposed by a stock exchange. Id.

3. Disclosure Regarding Company Leadership Structure and the Board’s Role in Risk Management Process. Under the 2009 Amendments, Item 407 as well as the proxy rules require disclosure of the company leadership structure, such as whether the CEO also serves as chairman of the board, and whether there is a lead independent director, as well as why the company believes this is the best structure. Amendment to S-K Item 407(h) and Item 7 of Schedule 14A. Disclosure would also be required as to the extent of the board’s role in the company’s risk management, and the effect this has had on the leadership structure. Amendment to Item 407(h).

Note: Companies, as part of their corporate governance focus, have in any event begun to separate the CEO and chairman of the board roles.

4. Disclosure re Diversity. The 2009 amendments require disclosure as to whether and how a nominating committee considers diversity in nominating directors, and whether the committee or the board has a policy on diversity.

5. Disclosure Regarding Compensation Consultants and Fees for Additional Services. The prior rules required disclosure of any role compensation consultants serve with respect to executive or director compensation, who hired the compensation consultants, the nature and scope of their assignment and the material elements of the directions given to the consultants. Item 407 was amended in 2009 to require fee disclosure for compensation consultants retained by the board in certain circumstances. If the board or compensation committee has engaged a consultant to advise regarding executive and director compensation, and the consultant or its affiliates provide other consulting services in excess of $120,000, fees and related disclosure (such as whether decision to engage consultant for non-executive compensation was made or recommended by management and whether the board has approved the non-executive compensation consulting services) is required. If management has engaged a consultant for executive compensation and non-executive compensation is in excess of $120,000 fee disclosure alone is required. Services involving any broad-based nondiscriminatory plans or information not customized for the company, are not executive compensation consulting and no fee disclosure is required. Amendment to Item 407(e)(3)(iii).

Note: The above disclosure will enable investors to assess any incentives the consultants would have in recommending generous executive compensation, as stated in the Preamble.

Note: These disclosure requirements are aimed at avoiding a conflict of interest, and in that respect is similar to restrictions on non-audit services by independent auditors.

6. Reporting of Stock or Stock Option with Full Grant-Date Value in Summary Compensation Table. Under prior December 2006 rules, the disclosure of stock awards and option-awards in the Summary Compensation Table and in the Director Compensation Table were determined based on the dollar amount recognized for financial reporting for the fiscal year. Items 402(c)(2) and 402(v)(2), 71 Fed. Reg. 78,338 (Dec. 29, 2006). The 2009 amendments revert to the original method used by the regulations, which is to report stock awards and option awards in the compensation tables based on the full grant-date fair value in accordance with FASB ASC Topic 718 (formerly FAS 123R). 2009 amendment to Items 402(c)(2)(v) & (vi) and 402(k)(2)(iii) and (iv). The amendments also eliminate the requirement of reporting grant-date fair value in the Grants of Plan-Based Awards Table or in the footnote to the Director Compensation Table because such amounts would already be provided for in the compensation tables. Amendments to Items 402(d) and 402(k)(2).

Note: This 2009 amendment is in response to numerous comments received by the SEC that the grant-date fair value is more useful than the amount recognized in the financial statements for the fiscal year because investors consider the compensation decisions made during the fiscal year, (which would be the full grant-date fair values) in making voting and investment decisions. In addition, the prior method of using the dollar amount recognized for financial reporting for the fiscal year can result in an anomaly of reporting a negative number when the stock price drops.

Note: A proposal to rescind the requirement to report the full grant date face value of each equity award in the Grants of Plan-Based Awards and Director Compensation tables was withdrawn in the final 2009 rules.

Note: The final rules adapt the proposal to have the stock and option award to the past years in order to facilitate comparison in years.

Note: Disclosure of awards is made based on awards granted during the year, and not for the year to which the performance is based. See Preamble to Final Rules, 74 Fed. Reg. 68339.

7. Salary or Bonus Foregone. There had been a proposal for salary and bonus columns in the Summary Compensation Table to not require reporting salary or bonus foregone at the election of the executive but the cash awards received instead or of salary or bonus would be reported in the column applicable to that form of award. However, as noted in the Preamble to the final 2009 rules the SEC decided not to adopt this change.

Note: The Preamble to the 2009 rules notes that disclosing the amounts or salary or bonus that the Compensation Committee awarded better enables investors to understand salary and bonus. See Instruction 2 to Item 402(c)(2)(iii) & (iv).

11. Disclosure of Target Performance Goals. The final 2009 rules require that grant date fair value of performance awards be reported in the Summary Compensation, Grants of Plan-Based Awards and Director Compensation tables based on the probable outcome of the performance conditions, consistent with the recognition criteria in FASB ASC Topic 718. The final 2009 rules do require footnote disclosure of the maximum value assuming the highest level of performance conditions is probable. See Instruction 3 to Item 402(c)(2)(v) and (vi), and Instruction 3 to Item 402(n)(2)(v) and (vi).

Note: This change was in response to comments that reporting the aggregate grant date fair value of performance awards based on maximum performance could discourage companies from granting these awards. As stated in the Preamble to the final 2009 rules, requiring disclosure of an award’s value to always be based on maximum performance would overstate the intended level of compensation and result in investor misinterpretation of compensation decisions. Item 402(n)(2)(v) and (vi).

The amendments are effective February 28, 2010.

Pension-Related Amounts Adjusted under § 1(f)(3)	2010 Amount	2011 Amount
Phase-out for deductions for IRA for married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan	$89,000 to $109,000	$90,000 to $110,000
Adjusted gross income (AGI) phase-out range for married joint filers taxpayers making contributions to a Roth IRA	$167,000 to $177,000	$169,000 to 179,000
AGI limit for retirement savings contributions credit for married couples filing jointly	$55,500	$56,500
IRC § 430(c)(7)(D)(i)(II) amount for determining excess employee compensation for defined benefit plans where election has been made	$1,000,000	$1,014,000

Wednesday, February 16, 2011

2011 Cost-of-Living Adjustments for Pension Plan and Other Limits; Transportation Fringe Parity Extended One Year by Tax Relief Act

Charles C. Shulman, Esq., LLC Employee Benefits, Employment & Executive Compensation Law www.ebeclaw.com – www.EmployeeBenefitsLaw.info

EXECUTIVE COMPENSATION PROVISIONS OF DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2010

Charles C. Shulman, Esq., LLC Employee Benefits, Employment & Executive Compensation Lawwww.EBEClaw.com

NOTICE 2010-80: RELIEF FOR PAYMENTS CONDITIONED ON EXECUTING RELEASES AND FOR § 409A CORRECTION PROGRAMS

Charles C. Shulman, Esq. Employee Benefits, Employment & Executive Compensation Law www.EBEClaw.com

Enhanced Executive Compensation Disclosure: A Summary of SEC’s 2009 Rules

Charles C. Shulman, Esq., LLC
Employee Benefits, Employment & Executive Compensation Law
www.ebeclaw.com – www.EmployeeBenefitsLaw.info

Charles C. Shulman, Esq., LLC
Employee Benefits, Employment & Executive Compensation Lawwww.EBEClaw.com

Charles C. Shulman, Esq.
Employee Benefits, Employment & Executive Compensation Law
www.EBEClaw.com