The NASPP Blog

This week I discuss a hodge podge of tax related updates: IRS Notice 2010-80, Code Y reporting, and the Social Security wage base for 2011.

IRS Expands 409A Documentation Corrections Program to Include Stock Rights
Early this year, when the IRS issued Notice 2010-6, I got a much appreciated reprieve from having to understand it because it handily didn’t apply to stock rights. (Well, handily for me at least; others may not have been so thrilled with this outcome.) Alas, my reprieve lasted less than a year; last week the IRS issued Notice 2010-80, expanding Notice 2010-6 to cover stock rights.

I’m surprised at this development because I wasn’t aware that very many, if any, companies needed this relief. I thought that, by now, companies had pretty much dealt with 409A in terms of their stock plans. If companies are in need of this relief, however, it may be necessary to take action by December 31, 2010–which is coming up quick; you’d think the IRS could have provided a little more time on this.

Luckily, I’m not sure that many companies are in need of this relief. It applies only to options that were not intended to be exempt from Section 409A. In my experience, this is pretty rare. So long as options are granted with a price equal to FMV at grant, it’s relatively easy to ensure that they are exempt. Where a company inadvertently grants a discounted option, assuming the option was intended to be exempt from 409A, it isn’t eligible for correction under Notice 2010-80 (however, it may be eligible for correction under IRS Notice 2008-113, which provides relief for operational errors).

I don’t know any companies that are granting options that aren’t intended to be exempt under 409A. Even where companies had pre-409A grants that weren’t exempt, I think the typical fix was to modify the options to be exempt, rather than to try to comply with 409A. So the bad news is that this relief probably isn’t that helpful for most of you but I guess the silver lining is that you probably don’t need to scramble to understand it by December 31.

Thanks to Art Meyers of Choate Hall & Stewart and Mike Melbinger of Winston & Strawn for helping me with my rudimentary understanding of Notice 2010-80.

Code Y
While we’re on the topic of 409A, I thought I’d mention that Code Y reporting still hasn’t gone into effect.  You will recall–or maybe you won’t, it’s been so long since 409A was enacted–that 409A requires companies to report amounts subject to deferral in Box 12 of Form W-2 using Code Y.  IRS Notice 2008-115 suspended this requirement until Treasury can issue regulations on it.  So far no regulations have been issued so chances are you won’t have to worry about Code Y for this year (but, then again, there are still 23 shopping days left until December 31, so I suppose the IRS could still come through with a late December Code Y surprise).

Thanks to Mike Melbinger of Winston & Strawn for confirming that there wasn’t some announcement about Code Y that I had missed.

Social Security Wage Base
Pursuant to a Social Security Administration press release issued on October 15, the maximum amount of wages subject to Social Security is not increasing for 2011–it will remain at $106,800 for another year. See the NASPP alert on this announcement for more information.

Vote for Broc and Dave!
Broc Romanek and David Lynn’s blog on TheCorporateCounsel.net was selected by the ABA Journal as one of the Top 100 Legal Blawgs. Readers can vote on their favorite blogs and we want Broc and Dave to win (they won last year), so we’re asking our readers to vote.  I know you all would vote for the NASPP Blog if you could, but we don’t count as a legal blog, so this is as close as you’ll come to voting for us. Come on, don’t make me beg!

Anyone can vote, you don’t have to be a member of the ABA. If you read and enjoy Broc and Dave’s blog–or even if you don’t–I hope you’ll vote for it.  BTW–if you have multiple email addresses, you can register and vote under each one. See Broc’s December 6 blog entry for instructions on voting. 

If you’ve never checked out the blog; it’s definitely worth a read. Unlike the lazy folks here at NASPP Blog, Broc and Dave manage to post an entry every day. And it’s free to anyone, whether you subscribe to TheCorporateCounsel.net or not. At a minimum, someone in your legal department should be reading it.

Less Than One Month Left to Get your Free Conference Session Audio
All NASPP memberships expire on a calendar-year basis. Renew your membership by Dec 31 and you’ll qualify to receive the audio for one NASPP Conference session for free!  Don’t wait any longer–the new year will be here before you know it!

This offer is also available to anyone the joins the NASPP before December 31–tell all your friends!

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. 

• Purchase the audio for the 18th Annual NASPP Conference.
• Vote for Broc & Dave’s blog.
• Complete the Compliance-O-Meter quiz on Risk Management.
• It’s “Make-Up Week” for the Question of the Week Challenge. Catch up on any questions you missed.
• Renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today).  Renew or join by Dec 31 to qualify to receive the audio of one NASPP Conference session for free.
• It’s another big week for NASPP chapter meetings!  Don’t miss your local NASPP chapter meetings in Austin, Michigan, Ohio, San Diego, the San Fernando Valley, and San Francisco.

– Barbara