The NASPP Blog

Today I planned on providing a review the top regulatory changes and legislative initiatives impacting equity compensation that we saw in 2010. However, in order to talk about the changes in 2010, we have to start in the last two months of 2009.

November 16, 2009: IRS released final regulations for Section 6039 reporting. For stock plan managers, this meant determining how to submit statements to the IRS and employees as well as organizing general employee communications. (We now have an entire portal dedicated to Section 6039!)

On the same day, the IRS also issued the final regulations for Section 423 ESPPs, to be effective as of January 1, 2010. In response, stock plan managers needed to review their ESPPs to ensure that plans are compliant by at least confirming plans specify a maximum numbers of shares that may be purchased in each offering, checking that they are properly computing the $25,000 limit per the actual plan language, and confirming that all 423 plans have a unique share reserve. The final regulations also opened up new possibilities for plan design by permitting unique terms for different offerings under the same plan.

December 16, 2009: The SEC announced executive compensation disclosure changes effective for all proxy filings made on or after February 28th, 2010. These include reporting the aggregate grant date fair value in the period that grants are awarded, rather than over the periods in which they are paid out as well as a discussion of how compensation practices relate to risk management. Depending on the level of involvement of the stock plan management team in proxy reporting, at a minimum this changes the way compensation is calculated for determining the company’s NEOs.

So, with the end of 2009 still ringing in our ears, we dove into 2010!

February 24, 2010: The SEC provided a statement in support of adopting IFRS, but extended the earliest adoption date to 2015. Stock plan managers may have breathed a collective sigh of relief, but still need take a look at their companies’ grant practices to see how difficult expensing could be under IFRS with current vesting parameters and withholding practices.

July 21, 2010: The Dodd-Frank Act was signed into law, calling for shareholder voting on executive compensation and change-in-control payments. The Act also expands clawback requirements and establishes additional disclosure requirements.

October 11, 2010: The IRS released final regulations for cost basis reporting, which was required under the Economic Stabilization Act of 2009. Stock plan managers will need to understand how brokers will be reporting cost basis on equity compensation through the implementation timeline and determine how best to educate employees.

October 18, 2010: The SEC followed up on the Dodd-Frank act by proposing regulations for say-on-pay.

November 8, 2010: The IRS finally released the final versions of Forms 3921 and 3922.

November 30, 2010: The IRS expanded the 409A documentation correction program to include stock options and SARs that were not intended to be exempt from Section 409A.

December 17, 2010: The tax relief bill (with a very long name), was signed into law, extending reduced tax rates, reducing the employee Social Security rates, and raising the amount of income exempt from AMT.

What is in store for 2011? One thing is certain; the NASPP will keep you up to date on whatever regulators throw our way. Be sure to renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today) and stay ahead of the curve!