Ask attorney Garth Gartrell what keeps him up at night – when it comes to thinking about executive compensation, that is – and you’re likely to hear about Section 409A of the Internal Revenue Code.
Created by the Internal Revenue Service (IRS) in the wake of the Enron scandal, 409A regulates the tax treatment of nonqualified deferred compensation, which includes supplemental executive retirement plans and supplemental defined contribution plans (such as those that wrap-around and supplement qualified 401(k) plans), whether paid to executives or any other employees.
“409A dominates the field of executive compensation right now, particularly in severance agreements but also in many aspects of compensation in a merger,” says Gartrell, shareholder, Greenberg Traurig, LLP.
Gartrell says Enron changed everything for executive compensation.
“Enron drove these fundamental changes that we’re going to have to be dealing with that are going to be changing the landscape of executive compensation for years to come,” Gartrell says. Hear more from Gartrell about Enron’s impact on executive compensation (1:54).
In addition to 409A, Gartrell monitors the IRS for other developments in executive compensation.
“I’m paying attention to anything that the IRS might have to say especially with the executive compensation wrinkles that have arisen out of the banking rescue plans,” Gartrell says.
Gartrell says executive compensation remains a varied and challenging area of the law. “The field touches so many complex areas, like securities, corporate law, tax, and accounting rules,” says Gartrell.
Gartrell is the co-author of Executive Compensation for Emerging Growth Companies, 3d, with Steven Lapidus, the founder and co-chair of Greenberg Traurig’s Global Benefits and Compensation group.
Their book, published by West, has a special emphasis on annotated forms that Gartrell and Lapidus have developed over many years of practicing in the field, including many ideas and forms since the first edition was published.
Executive Compensation for Emerging Growth Companies, 3d is available on the West Web site.
Posted by Kevin Hunt, senior communications specialist, Thomson Reuters
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