SARs Archives - EMPLOYEE BENEFITS BLOG

Understanding a Trustee’s Role in Management Incentive Plans

by McDermott Will & Emery | Jun 9, 2022 | Benefit Controversies, Employee Benefits, Employee Stock Ownership Plans (ESOPs), Executive Compensation, Fiduciary and Investment Issues, Retirement Plans

On May 5, 2022, McDermott Partner Erin Turley delivered a presentation during the 2022 TEA National Conference titled “Understanding a Trustee’s Role in Management Incentive Plans.” Her presentation focused on the trustee’s role in Management Incentive Plans (MIPs), how retention and performance stock appreciation rights (SARs) impact an employee stock ownership plan (ESOP) and ways to avoid trustee pitfalls with a MIP. Erin also discussed types of synthetic equity design decisions, incentive stock options, non-statutory stock options and phantom stock/SARs.

The presentation concluded with the following fiduciary considerations:

Since the issuance of any equity or synthetic equity can have a potentially dilutive impact on the ESOP, it is important for any plan to be in the best interest of the ESOP plan participants.
As a result, one of the primary objectives of the plan should be to identify and select a group of people to be incentivized and rewarded to drive value for everybody.
For example, in the case of a SAR, you are rewarding a group of individuals based only on appreciation in the value of the company stock. If the value goes up, that’s good for everybody.
The overall compensation program should be in line with compensation practices for comparable-type positions in the industry, perhaps taking geography into account.

For questions about employee benefits matters, please contact Erin or McDermott’s employee benefits practice team.

DOL Issues New Proposed Rule for Electronic Disclosures of Retirement Plan Notices

by Alan D. Nesburg, PC, Erin Steele and Jacob Mattinson | Oct 31, 2019 | Employee Benefits, Retirement Plans

The Department of Labor (DOL) issued a proposed rule that, if finalized, would expand its existing guidance and liberalize rules for electronic disclosure of retirement plan notices under ERISA. The proposed rule, which sets forth a notice and access safe harbor, would permit electronic disclosure as the default method of delivery while permitting participants to opt out and continue to receive paper disclosures.

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IRS Issues Long-Awaited Initial Guidance under Section 162(m)

by Andrew Liazos, Joseph K. Urwitz, McDermott Will & Emery and William R. Pomierski | Aug 23, 2018 | Employee Benefits, Executive Compensation

On August 21, 2018, the IRS issued guidance regarding recent statutory changes made to Section 162(m) of the Internal Revenue Code. Overall, Notice 2018-68 strictly interprets the Section 162(m) grandfathering rule under the Tax Cuts and Jobs Act.

Public companies and other issuers subject to these deduction limitations will want to closely consider this guidance in connection with filing upcoming periodic reports with securities regulators. Further action to support existing tax positions or adjustments to deferred tax asset reporting in financial statements may be warranted in light of this guidance.

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