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Deferred compensation is an arrangement in which a portion of an employee's wage is paid out at a later date after which it was earned. Examples of deferred compensation include pensions, retirement plans, and employee stock options.
Since options often vest and become taxable more than 1 year after they are granted, it would seem that 409A would apply to this as a form of deferred compensation. However, 409A specifically does not apply to incentive stock options (ISOs) and non-qualified stock options (NSOs) granted at fair market value. [10]
A long-term incentive plan or LTIP is a type of executive compensation that typically comes in the form of performance shares or matching shares of the company. In the United States, these plans were used heavily since Internal Revenue Code Section 162(m) passed, which permitted deductions for certain performance-based compensation without limitation.
Executive compensation practices came under increased congressional scrutiny in the United States when abuses at corporations such as Enron became public. The American Jobs Creation Act of 2004, P.L. 108–357, added Sec. 409A, which accelerates income to employees who participate in certain nonqualified deferred compensation plans (including stock option plans).
Vesting is an issue in conjunction with employer contributions to an employee stock option plan, deferred compensation plan, or to a retirement plan such as a 401(k), annuity or pension plan. Once a retirement plan is fully vested, the employee has an absolute right to the entire amount of money in the account. [1]
Incentive stock option; Internal Revenue Code section 132(a) ... Non-qualified stock option; Nonqualified deferred compensation; P. Paid time off; Pay-for-Performance ...
(2003) "Explaining Executive Compensation: Managerial Power versus the Perceived Cost of Stock Options", University of Chicago Law Review, 69, 847-869. Murphy, Kevin. (2003) "Stock-Based Pay in New Economy Firms", Journal of Accounting and Economics , 34, 129-147.
A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). Stock repurchases are used as a tax efficient method to put cash into shareholders' hands, rather than paying dividends , in jurisdictions that treat ...
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