Page 754 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Appendix B. Selected Laws 739

1978 Civil Rights Amendment
• Stipulated that pregnancy and childbirth be treated the same as other disabilities for benefit
purposes
1978 Age Discrimination in Employment Act (ADEA)
• Raised the protected age to 70 except for exemptions
1978 Revenue Act
• Lowered LTCG to 28%, but deductible portion of LTCG made subject to alternative
minimum tax
• Continued favorable tax treatment of deferred compensation
• Added Section 401(k), “Cash or Deferred Compensation” (CODA)
• Shifted from investment to payroll-based employee stock ownership plan (PAYSOP)
• Introduced nontaxability of educational assistance
• Disallowed tax deductions on recreation facilities
• Introduced Simplified Employee Pension (SEP)
• Eliminated discriminatory self-insured medical plans
• Introduced “cafeteria benefit plans” (Section 125)
1979 Technical Corrections Act
• Created tax credit employee stock ownership plans (ESOPs)
• Identified TRAESOPs as tax credit ESOPs as opposed to leveraged ESOPs
1980 Miscellaneous Revenue Act
• Permitted employee to make three-way trade-off among cash, benefits, and deferred
compensation
1980 Multiemployer Pension Plan Amendment Act
• Permitted Secretary of Labor to treat severance as welfare, not a pension plan
1981 Economic Recovery Tax Act (ERTA)
• Restored statutory stock options in the form of incentive stock options (ISOs):
– Option price could not be lower than 10% of FMV at time of grant
– No tax until sold if held for more than two years from date of grant and one year from date
of exercise; then taxed as capital gain
– Annual exercisable number of shares times option price cannot exceed $100,000
– Term of grant not to exceed 10 years
• Provided tax incentives for child and dependent care benefit (Section 129)
• Lowered LTCG tax to 20% and lowered maximum tax to 50%
• Extended IRAs to all workers as well as increased ceiling to $2,000; Keogh plan maximum
increased to $15,000
• TRAESOPs replaced by payroll-based credits through 1987

1982 Tax Equity and Fiscal Responsibility Act (TEFRA)
• Lowered maximum pensions permitted under Section 415
• Added new top-heavy rules in qualified pension plans (Section 416)
• ISOs subjected to AMT because gain at exercise considered tax preference income
• Made Medicare secondary payor

1983 Social Security Act Amendment
• FICA tax on deferred compensation due at the latter of when services performed or when the
compensation is no longer subject to the substantial risk of forfeiture
• Phased in age 66 and 67 retirement ages