On November 2, 2017, the House Ways and Means Committee unveiled the Tax Cuts and Jobs Act (the “Bill”), which, if enacted, could dramatically impact certain aspects of executive compensation and employee benefit issues. The Bill represents the first actual legislative language about these issues and has been amended by the Ways & Means Committee (and further amendment may follow later this week). Republican leaders in the House hope for a full vote during the week of November 13, 2017.
The following is a summary of the key provisions of the Bill that impact current executive compensation and employee benefit practices, which would generally go into effect on January 1, 2018. For a summary of changes contemplated by the Bill that do not relate to compensation and benefits, see our alert titled “House Republicans Release Draft Tax Proposal; Committee Markup Begins.”
Non-Qualified Deferred Compensation
Limitations on Performance-Based Compensation
Changes to Retirement Arrangements
Revisions to Employee Benefit Arrangements
Additional Legislation on Stock-Based Compensation
Although not included in the Bill, there is a separate bill currently before the Senate called the Empowering Employees through Stock Ownership Act sponsored by Congressman Erik Paulsen (R-Minn). This bill seeks to amend the tax code to allow an employee to elect to defer, for income tax purposes, income attributable to certain stock transferred to the employee by an employer. If enacted, the bill would allow an employee to defer the inclusion of income from the stock until the year that includes the earliest of the dates on which:
Prior to enactment, the Bill is likely to evolve and may do so significantly. We will continue to monitor the Bill as it moves through the legislative process and will provide any significant updates. In the meantime, we encourage you to review your executive compensation and employee benefit arrangements and to reach out to any member of the Compensation, Benefits + ERISA team at MoFo to discuss how the Bill may impact these arrangements.
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