Public companies maintaining deferred compensation arrangements
for their executive officers should consider how recent changes to
the regulations under Section 162(m) of the Internal Revenue Code
(the Code) may impact the timing of payments to be made to
participants and their beneficiaries under such plans
– if action is required, the affected plans
must be amended before December 31, 2020 to avoid complications or
penalties.
Section 162(m) of the Code disallows a tax deduction for
any compensation paid to a “covered employee” of a
public company over one million dollars (Million Dollar Limit). On
December 16, 2019, the IRS issued
proposed regulations (Proposed Regulations) implementing
certain changes that were made to Section 162(m) of the Code by the
Tax Cuts and Jobs Act of 2017 (2017 Tax Act). The 2017 Tax Act made
several significant revisions to Section 162(m), including changing
the definition of “covered employee” such that a
covered employee in any year
