The NASPP Blog

Based on a recent IRS announcement and alerts we’ve received from law firms, the IRS is stepping up audit activity on executive compensation and employee benefit plans.

Employment Tax Audits
On November 9, the IRS announced an employment tax research study that will include audits of 6,000 companies over the next three years. The study is expected to help the IRS determine areas of greatest compliance risk, which will aid in selecting and auditing future employment tax returns. Companies file employment tax returns to report taxes that have been withheld on employee wages.

According to an alert issued by Pillsbury, the audits will focus on worker classifications (i.e., employee vs. non-employee), fringe benefits, executive compensation, and qualified employee benefit plans. Levine & Baker also mention the impending audits in their January 2010 client newsletter, warning that companies would be ahead to review their tax practices now, before they get an audit notice and still may have an opportunity to address inadvertent errors.

409A Audits Started Already
According to a Jones Day alert that we posted on Naspp.com, the IRS has already started auditing deferred compensation arrangements for compliance with Section 409A. Recent Information Document Requests issued to companies undergoing audits have included items related to §409A compliance.

As described by Jones Day, the information requested by the IDRs includes:

• Identification of arrangements that the company does not consider to be subject to §409A, but that create a legally binding right to compensation that won’t be paid until a later year. Stock options and restricted stock, of course, are prime examples of these types of arrangements. They also include plans that are exempted from §409A under the short-term deferral rule.
• Terms and deadlines for making deferral elections, re-deferrals, and any payment accelerations.
• The names of “specified employees” and payments made to them upon separation of service.
• Certain information on stock options and SARs that may be subject to §409A.
• Any §409A violations and whether the company participated in the §409A corrections program.

Technical Corrections to Section 423 Regs
Turns out the IRS makes typos just like the rest of us. Technical corrections to the final regulations under Section 423 were issued on December 22, 2009. Nothing substantive, though, just a couple of minor textual errors. Just because I thought it would be cool, I’ve annotated the PDF of the final regs that we have posted here on Naspp.com with the corrections; see §1.423-2(a)(1) (pg 15), §1.423-2(d)(3) (pg 24), and §1.423-2(i)(5) Example 5 (pg 39). The full text of the corrections is on pg 46.

ShareComp 2010
The NASPP is happy to announce its support of ShareComp 2010, a fully virtual conference on stock compensation. NASPP members can attend the event for free using the sponsor pass “naspp”; feel free to share this sponsor code with others at your company.

ShareComp 2010 will be held live on February 23, 2010 and all presentations, documents, and booths will be available on-demand for a year afterwards. Presentations, solutions, and providers will focus on the needs of professionals in executive roles, finance, human resources, compensation, accounting and stock administration positions. Benefits of attending include:

• 16 hours of live global interactive learning and networking
• Best practices for designing, implementing and managing stock compensation programs
• Instructional sessions that will share real-world examples, tactics and lessons learned
• Facilitated discussion forums with experts and practitioners
• A searchable library, including presentations, Q&A sessions and booth materials
• A year of access to the conference center and the materials

To find out more about, visit www.sharecomp2010.com. Register today for this no-risk, high-impact event (be sure to enter sponsor pass “naspp” for free registration). While you are attending the event, we hope you’ll stop by the NASPP booth.

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

• Don’t miss Alan Dye’s webcast on Thursday January 28, on Section 16 developments.
• Complete the Compliance-O-Meter quiz on Preparing for Year-End.
• Purchase the NASPP Conference audio. 
• Renew your NASPP membership for 2010 (if you aren’t an NASPP member, join today). 
• Attend your local NASPP chapter meetings in Dallas, Philadelphia, the Twin Cities, and Wisconsin. 

-Barbara