Structuring Equity and Nonqualified Deferred Compensation: Achieving Tax and Legal Objectives

Each type of equity compensation and nonqualified deferred compensation is subject to tax rules that determine the timing and amount included in employee gross income from the compensation and the deduction to the employer for paying this compensation.

For equity compensation, which generally includes restricted property, stock options, performance shares and similar incentive pay, the tax rules are found in IRC Sections 83, 421 and 422 and the Treasury regulations and related IRS guidance.

For nonqualified deferred compensation, which generally includes supplemental executive retirement plans (SERPs) and plans of deferred pay, the tax rules are found in IRC Sections 61, 162, 280G, 404, 409A, 451, 457, 3121 and 3306, the Treasury regulations, and relevant IRS guidance. ERISA must be considered when structuring nonqualified deferred compensation.

Counsel must understand these statutory and regulatory rules, IRS guidance, and, where applicable, DOL guidance on ERISA, to structure, draft and implement the equity compensation and nonqualified deferred compensation, and to achieve the tax and legal results the employer intends. Our experienced panel will provide direction to executive compensation counsel on structuring the compensation in light of these rules and this government guidance, as well as the panel’s own experience representing corporations and senior executives.

Listen as our authoritative panel discusses important topics such as the general workings of the rules and regulations under IRC Sections 83 and 409A, substantial risk of forfeiture with restricted property, income recognition, IRC Section 83(b) elections, tax withholding requirements, IRC Section 162 deduction rules and limits, and golden parachute rules. The panel will provide practical considerations, practice pointers and drafting tips for preparing equity compensation and nonqualified plans of deferred compensation.

1. Types of executive compensation—general overview
2. Equity compensation—description, use and tax consequences
3. Nonqualified deferred compensation—description, use, tax and ERISA consequences
4. Deferred compensation for tax exempt employers

The panel will review these and other key issues:

• IRC Sections 83, 421 and 422 for equity compensation
• IRC Sections 61,162, 280G, 404, 409A, 451, 457, 3121 and 3306 for nonqualified deferred compensation
• Practical considerations, practice pointers and tips for structuring, drafting and implementing compensation

Learning Objectives

After completing this course, you will be able to:

• Discern the rules and regulations under the IRC and ERISA that apply to equity compensation and nonqualified plans of deferred compensation
• Distinguish the circumstances under which one type of compensation is preferable to another
• Recognize how to structure equity compensation and nonqualified plans of deferred compensation to achieve intended legal and tax results

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience advising the business or clients on executive compensation matters, at mid-level within the organization, supervising other preparers/accountants. Specific knowledge and understanding of IRS rules and regulations applicable to executive compensation packages, including equity compensation and nonqualified deferred compensation. Familiarity with ERISA, Treasury Regulations and IRS guidance relevant to tax implications for executive compensation structures.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).