Under IRC Section 162(m)
CD of Teleconference with Q&A
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Conducted on Wednesday, April 9, 2008
Now available on CD |
On Jan. 25, the IRS released a Private Letter Ruling (PLR) disallowing a business's exemption under IRC Section 162(m) for an employment agreement that allowed payout of performance-based compensation upon an involuntary or “good reason” employment termination without regard to satisfaction of the performance criteria. The IRS issued a Revenue Ruling confirming the PLR on Feb. 21.
The new ruling signals a surprising reversal of the IRS's position in two prior letter rulings, creating uncertainty regarding what constitutes performance-based compensation under 162(m). It also has potential 409A implications related to nonqualified deferred compensation.
In light of this ruling, legal advisors should review and revise existing performance-based plans that permit payment after an involuntary or “good reason” termination. In addition, counsel should consider the IRS position in designing new compensation plans and employment and severance agreements.
Listen as our panel of employee benefits attorneys explains the recent PLR and subsequent Revenue Ruling, the status of prior PLRs on the subject, 409A implications and steps employers should take now to ensure that performance-based compensation plans, employment agreements and severance agreements comply with the new standards.
The panel included:
Joseph S. Adams, Partner, McDermott Will & Emery, Chicago. He concentrates in employee benefits and executive compensation matters. He has substantial experience advising clients regarding incentive compensation programs and regularly speaks on the topic.
Randy L. Gegelman, Partner, Faegre & Benson, Minneapolis. He has extensive experience with executive contracts and compensation and a special expertise in stock-based compensation arrangements.
Matthew E. Johnson, Partner, Sidley Austin, Chicago. He advises clients in all types of employee benefits and executive compensation matters. He regularly represents corporations in the design and administration of equity-based compensation plans.
The panel reviewed these and other key questions:
- What types of performance-based arrangements are affected by the new ruling?
- What is the impact of the new ruling on existing performance-based compensation plans?
- What do employers need to do now to ensure that their compensation agreements comply with the IRS's new guidance?
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TELECONFERENCE CD
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