Page 759 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

744 The Complete Guide to Executive Compensation

• Raised AMT exemption to $58,000 for married couples filing jointly (was $49,000) and to
$40,250 (from $35,570) for single taxpayers through 2004
• Lessened marriage tax penalty at lower income levels
• Raised child credit to $1,000 (from $600) through 2004
2003 Medicare Act
• Added prescription drug benefit
• Permitted tax-free withdrawals on pretax health saving accounts
2005 The American Jobs Creation Act
• Nonqualified deferred compensation requirements:
– Decision to defer must be made before beginning of the performance period
– Performance period cannot be shorter than 12 months
– Bonus amount must be variable and contingent
– Performance criteria must be in writing
• Stock appreciation rights (SARs) will be subject to tax at time of vesting
• Restricted stock units (RSUs):
– Decision to defer must be at least 12 months before scheduled payment date
– Required payment to be deferred at least five years from previously scheduled date
• Supplemental executive retirement plans (SERPs):
– If an election to change form of payments is made, payments will be deferred at least five
years from previous commencement date
– Payments cannot be accelerated
• Early payment with a “10% haircut” no longer permitted; accelerated payment only in event of
“unforeseen emergency”
• Payment to key employees must be delayed at least six months upon separation of service
• Eliminated corporate tax deduction for entertainment purposes by top officers and directors
2005 Bankruptcy Abuse Prevention and Consumer Protection Act
• Reorganization plan must be complete within 120 or 180 days (depending on size of business)
plus one extension
• Individuals will have to pass a means test before going into Chapter 7; those going into Chapter
13 will be pressured to get money to get out of bankruptcy
2006 Tax Act
• Extended through 2010 the 15% tax rates on long-term capital gains and dividends (which oth-
erwise would have expired after 2008)
• Raised AMT exemption to $62,500 (from $58,000) for couples and to $42,500 (from $40,250)
for single taxpayers
• Eliminated foreign sales corporate export subsidy
2006 Pension Protection Act
• Automatic enrollment in 401(k) plans facilitated
• Companies have seven years for defined benefit plans to become solvent; airlines have 17 years,
and auto companies receive exemption to 70% funding.
• Trustees of multi-employer plans given increased authority
• Annual per employee premium to PBGC increcased to $1,250
• Encourages employers and financial-service firms to provide advice services
• Withdrawals from 529 college savings plans are permanentaly tax-free when used for tuition,
fees and room and board

Source: United States Code