A New World for Nonqualified Deferred Compensation Plans
January 26, 2005
Employment lawyers have been inundated in the last few weeks with calls from clients asking how and whether the new American Jobs Creation Act affects various severance pay plans and other deferred compensation plans. If you are still recovering from the recent presidential election, or are preoccupied by the pending elections in Iraq, this one may have slipped by you. The smart thing to do would be to consult your benefits partner, as I did. In this article, I explain this new law in layman's terms and help you respond to those callers clamoring for information about this creatively titled statute.
Second Opinion: New Tax Requirements for Nonqualified Deferred Compensation
January 26, 2005
The American Jobs Creation Act (the "Act") was passed by the House of Representatives on Oct. 7, 2004, and received final approval from the Senate on Oct. 11, 2004. President Bush was expected to sign the Act into law before the end of 2004. The Act enumerates an array of requirements intended to curb perceived abuses in the realm of executive compensation. In many ways, the thrust of the new requirements is to conform a number of aspects of the operation of nonqualified deferred compensation arrangements to those applicable to tax-qualified "401(k)" plans. Consequently, to be tax-effective under the new requirements of the Act, deferred compensation arrangements will need to operate in a fashion more akin to true retirement arrangements.
Survey Shows Diversity Increasing At Big NY Firms
January 26, 2005
Slightly more than 2% of the lawyers at 23 of New York City's largest firms identify themselves as being lesbian, gay, bisexual or transgender, according to a New York County Lawyers' Association survey. The survey, the first of its kind, also found that the participating firms prohibit discrimination against employees because of their sexual orientation or identity. Those firms also uniformly reported extending family benefits coverage they provide to married couples to same-sex couples registered with the city as domestic partners.
Employment Taxes and Stock Options
December 27, 2004
More than 2 years ago, the Internal Revenue Service published Revenue Ruling 2002-22, 2002-19 I.R.B. 849, in which it held that section 1041 of the Internal Revenue Code governed the transfer of stock options and interests in certain unfunded deferred compensation arrangements to the employee's spouse under a marital property settlement. As a result, the employee spouse was not taxable on the transfer. Instead, the spread on the options (the difference between the value of the employer 's stock at the time of exercise and the striking price) and the amount received as deferred compensation under unfunded arrangements were taxable to the nonemployee spouse in the same way and to the same extent as it would have been taxed to the employee. The ruling interpreted section 1041 to have established the rule that property transfers in divorce should be taxed as if the property conveyed were community property that had been transferred in settlement of the transferee's community property rights. As community property, stock options and interests in unfunded deferred compensation arrangements constituted "property" for section 1041 purposes, and the amounts received by the nonemployee spouse would be ordinary income to her (or him), taxable as compensation under IRC '83 and would be "wages" subject to employment taxes and withholding by the employer.
Why Mediation Works
December 27, 2004
In mediation, a trained third-party neutral is selected by the parties (or appointed by a tribunal) to assist the parties in resolving their dispute. Mediators may be members of a panel, are associated with a dispute resolution organization, or have a private mediation practice. Mediators serve pursuant to written mediation agreements that provide for confidentiality of the process, and outline the procedure that will be used in the mediation session. The hallmark of mediation is that the mediator meets with both sides, in joint and separate caucuses, and guides the parties through exchange of information and exploration of interests and positions in a confidential setting with the goal of enabling the parties to reach agreement themselves.
Paramours and Promotions
December 27, 2004
Title VII of the Civil Rights Act of 1964 is the major federal anti-discrimination law and prohibits job bias on the basis or race, color, religion, national origin, or sex. The U.S. Equal Employment Opportunity Commission (EEOC), which administers Title VII, has issued a policy guidance stating that the statute does not prohibit isolated instances of preferential treatment based on consensual romantic relationships -- "An isolated instance of favoritism to a 'paramour' (or a spouse, or a friend) may be unfair, but it does not discriminate against women or men in violation of Title VII, since both are disadvantaged for reasons other than their genders."
NLRB Overrules M.B. Sturgis
December 27, 2004
An important representation issue under the National Labor Relations Act (NLRA) involves scenarios where the scope of a bargaining unit is proposed to include both an employer's regular workers and employees supplied by a separate employer, such as a staffing agency. Just over 4 years ago in <i>M. B. Sturgis</i>, 331 NLRB 1298 (2000), the Board stated that "a growing number of employees who are part of what is commonly described as the 'contingent work force' are being effectively denied representational rights guaranteed them under the National Labor Relations Act." Therefore, the Board majority in <i>Sturgis</i> -- consisting of Chairman Truesdale and Members Fox and Liebman -- overruled prior precedent in <i>Lee Hospital</i>, 300 NLRB 947 (1990) and <i>Greenhoot, Inc.</i>, 205 NLRB 250 (1973), and held that a bargaining unit could include both regular and supplied employees without the consent of both the regular employer and the supplier employer.
