Authored by Morrison & Foerster’s Compensation, Benefits + ERISA Team
On December 20, 2017, the Tax Cuts and Jobs Act (the “Act”) was approved by Congress, and it was signed into law by President Trump on December 22, 2017. The Act dramatically impacts certain aspects of executive compensation and employee benefit issues but does not include the repeal of Section 409A that was originally proposed by both the House and Senate although subsequently removed. The Act went into effect on January 1, 2018 (unless otherwise noted herein).
The following is a summary of the key provisions of the Act that impact current executive compensation and employee benefit practices.
Limitations on Performance-Based Compensation
Excise Taxes on Tax-Exempts and Governmental Organizations for Excess Executive Compensation
New Code Section 83(i)
The Act adds a new feature to allow an employee to elect to defer, within 30 days of the vesting date, income tax (but not FICA taxes) attributable to certain stock transferred to the employee by an employer. It allows an employee to defer the inclusion of income from the stock until the year that includes the earliest of the dates on which:
Change to 401(k) Plan Loan Rollover Period
Revisions to Employee Benefit Arrangements
Affordable Care Act Revisions
Employer Tax Credit for Paid Family and Medical Leave
The implications of the Act are vast, and 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 Act impacts those arrangements.
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