Final Regulations on Exempt Organization Excess Compensation Excise Tax

On Monday, January 11, Treasury and the IRS released final regulations under section 4960. Section 4960, enacted as part of the Tax Cuts and Jobs Act (TCJA), imposes an excise tax on remuneration in excess of $1 million and any excess parachute payment paid by an applicable tax-exempt organization (ATEO) to any covered employee. The excise tax and the final regulations can affect not only ATEOs, but also certain entities that are treated as related to those organizations. READ MORE

Covid has made performance evaluations simpler, more empathetic

Count performance evaluations among workplace practices changed by the Covid-19 pandemic, and some of those modifications are expected to stick around.

With millions still working remotely, Gartner polls from 2020 found most organizations are tweaking evaluations rather than canceling them entirely amid the pandemic, The Wall Street Journal reports. Many business leaders are approaching performance reviews with more empathy and flexibility, even as more than half of executives said employee performance was a top concern in 2020. READ MORE

Top Wage and Hour Updates From 2020

As employers adapt to the impacts of COVID-19, wage and hour compliance continues to present unique challenges. To help employers navigate these uncertain times, government enforcement agencies and legislatures have continued to issue new laws, opinion letters, and guidance all employers should understand and act upon. As summarized below, 2020 presented several significant developments regarding wage and hour obligations that all employers should recognize and appreciate as we begin the New Year. READ MORE

Season’s Greetings for Annual Incentives

The business year has ended, but managers everywhere are turning their thoughts to receiving one last Christmas present. The calculators are out and every eligible soul from marketing to manufacturing to sales, IT, HR and the executive suite is trying to figure what their annual incentive check will look like. For some, it's still the gift-receiving season. READ MORE

The Critical Role Compensation Plays in Moving Leadership Forward

The pace of change happening in the world around us signifies that past success is not necessarily indicative of future success. The critical skills needed to lead a company a decade ago are simply no longer sufficient in today’s environment. As a result, boards need to redefine leadership — even among their own ranks — to ensure that reward systems can attract and retain the best talent. READ MORE

IRS Issues Final Regulations Regarding Certain Employee Remuneration in Excess of $1 Million Under Section 162(m) of the Code

Section 162(m) of the Internal Revenue Code of 1986 (as amended, the “Code”) imposes a $1 million deductibility limit on compensation paid by “publicly held corporations” to “covered employees.” As reported in our previous client alert published on January 8, 2018, in December 2017, the Tax Cuts and Jobs Act (the “TCJA”) made numerous changes to the Code Section 162(m) deduction limitation, including repealing key exceptions for commissions and qualified performance-based compensation, expanding the definition of “covered employee” and extending the applicability of Code Section 162(m) to certain corporations, even if the stock is not publicly traded. READ MORE

What can HR, employers expect from a Biden administration agenda?

Biden has proposed to increase marginal tax rates, Social Security taxes and capital gains taxes, which could all gain traction. The focus for executive compensation may also pivot to the regulatory front, specifically to a Democratic-led Securities and Exchange Commission. The WTW authors note that, while the pandemic will likely get top priority, expect recent changes to regulations passed along partisan lines to be revisited during a Biden administration. These could include easing the recently imposed restrictions on proxy advisors, proxy access and shareholder proposals, which could increase shareholder influence over corporate operations. READ MORE

SEC Proposes Changes to Modernize and Simplify Equity Compensation Rules

On November 24, 2020, the Securities and Exchange Commission (“SEC”) proposed amendments to Rule 701 and Form S-8 (the “Proposals”) under the Securities Act of 1933, as amended (the “Securities Act”). The Proposals are intended to (1) facilitate the ability of companies that are not required to file reports with the SEC to issue securities to compensate certain service providers, and (2) simplify the existing registration processes for compensatory offerings by reporting companies. Simultaneously, the SEC also proposed a temporary rule that would allow non-reporting issuers to issue equity compensation to certain “Platform Workers” who provide services through a technology-based marketplace platform (the “Temporary Proposal”). READ MORE

Three Tips for Effective Pay Equity Audits

Especially for growing businesses, claims of pay inequities could do substantial economic and reputational harm. If structured with risk management in mind, pay equity audits are instrumental in reducing long-term legal and reputational costs. Under relevant federal laws, employers’ efforts to remediate pay disparities may limit liability based on bad faith or intentional violations. In certain states, safe harbor protection is available for employers that take affirmative steps to reduce or eliminate pay inequities. READ MORE