Page 755 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

740 The Complete Guide to Executive Compensation

1983 Technical Corrections Act
• Pyramiding stock-for-stock exercise of ISOs will result in taxable disqualifying disposition
1984 Deficit Reduction Act (DEFRA)
• Revised qualified retirement estate-tax exclusions, distribution rules, and top-heavy rules
• Prevented most taxable benefits from being included in Section 125 flexible benefit plans
• Lowered holding period for long-term capital gains to six months

1984 Tax Reform Act
• Essentially killed interest-free loans
• Made changes in IRAs and ESOPs
• Created 20% excise tax on excess golden parachute payment to executive and loss of company
tax deduction if in excess of stated allowable
1984 Retirement Equity Act
• Preretirement survivors annuity of qualified pension plan required under joint and survivor rules
• Qualified domestic relations order established
1985 Consolidated Omnibus Budget Reconciliation Act (COBRA)
• Assured unemployed individuals access to health insurance for a specified time period
• Increased per-participant PBGC single-employer plan premiums
1986 Omnibus Budget Reconciliation Act (OBRA)
• Further tightened defined-benefit funding standards and placed additional restrictions on plan
terminations
1986 Federal Employees Retirement System Act
• Salary reduction plans such as those for state and local government employees (Section
457 plans) extended to federal civilian employees
1986 Age Discrimination Act
• Eliminated mandatory retirement at any age except for occupational and executive exemptions
• Pension credit after normal retirement required
1986 Immigration Reform and Control Act
• Illegal aliens cannot be hired; employers required to verify that new hires are not illegal aliens
1986 Tax Reform Act
• Lowered maximum tax to 28% for annual income over $149,250 but eliminated favorable
taxation of long-term capital gains
• Alternative minimum tax increased to 21% (was 15%)
• Eliminated exercise sequence rule for ISOs
• $100,000 ISO limit on amount exercisable in a given year (was $100,000 calendar year limit)
• Lowered 10-year vesting to 5 years for qualified single-employer plans
• Defined “highly compensated employee”
• Phased out capital gains treatment in lump-sum distributions
• Limited 401(k) plan contributions to $7,000 per year (CPI adjusted)
• Introduced 15% tax on tax-qualified pension payouts
• Modified integration rules of company pension plans and social security
• Froze Section 415 limit on payment
• Made IRAs less attractive to some
• Limited favorable tax treatment of lump-sum distributions
• Repealed PAYSOP
• Established nondiscrimination rules for health care and other qualified welfare plans