The Blog

We’ve taken it upon ourselves to consolidate all of our content from this year into one post, for your enjoyment! This holiday season many of us might find ourselves with more downtime than usual. We thought we would suggest some content pieces for those interested in all things compensation. For the podcast lovers, we encourage you to listen to one of our 2020 webinars. Prefer to scroll instead of listen? Check out one of our white papers, guides, or blog posts. Lastly, in a year during which so few in person meetings were held, we thought we’d make it easier for you to navigate to the LinkedIn pages of our EBS consultants, a few of our webinar partners, and our company page. We would love to start the year 2021 off by connecting with a few of you.

Webinars:

Join our subject matter experts to brush up or to dive in to one of the topics below.  As always, stick around (or fast forward to the end) for a Q&A session.

4 KEYS TO INCENTIVE COMPENSATION SUCCESS IN AN UNCERTAIN ECONOMY

The COVID economy has caused you to confront the flaws of your previous rewards approach and now you must determine what role value-sharing should play going forward—assuming it has any role at all. So, what should you do?

VisionLink and EBS would like to help you answer these questions. Listen now to our joint webinar, 4 Keys to Incentive Compensation Success in an Uncertain Economy. In this broadcast, you will learn why the right kind of incentive plans are more important now than ever before. We will show you how to create a value-sharing approach that will work in any economy and give your rewards strategy the flexibility and depth it will need going forward.

HOW INSURANCE CARRIERS ARE ENHANCING RETURNS AND OBTAINING CAPITAL RELIEF IN A LOW RATE ENVIRONMENT

Featured Presenters: Steve Doire of Clearwater Analytics, Patrick Tuttle of JP Morgan, Don Curristan of EBS, Chris Rich of EBS, and Chris Wyrtzen of EBS.

Listen to a live discussion on How Insurance Carriers are Enhancing Returns and Obtaining Capital Relief in a Low Rate Environment, recorded on November 10th.

Topics covered:

• Overview on trends in Insurance Asset Management
• Discussion of specific asset strategies especially alternatives.
• Discussion of ICOLI
• How ICOLI can be used to mitigate executive benefit plan costs

NAVIGATING 162(M) IN DEFERRED COMPENSATION PLANS

Featured Presenters: Trevor Lattin of EBS, Chris Rich of EBS, and Jeff Roberts of StockShield.

Listen to a live webinar on how to best navigate 162(m) with deferred compensation plans recorded on November 18th.

The presentation reviews new tax planning opportunities created by recent legislation. The following topics are covered:

• The 2017 Tax Cuts and Jobs Act (the “2017 Act”) modified Internal Revenue Code Section 162(m) which increased the number of companies subject to Section 162(m), increased the number of covered employees at each company, and eliminated the exemption for performance-based compensation and commissions in excess of $1 million.
• Now that several years have passed since the 2017 Act, more compensation is subject to Section 162(m) limits as grandfathered employment agreements begin to expire.

This webinar highlights a new tax planning opportunity for companies who already sponsor a voluntary deferred compensation plan.

White Papers:

A PRACTICAL GUIDE TO ACCOUNTING FOR LOAN REGIME SPLIT DOLLAR ARRANGEMENTS

If you are considering the use of a loan regime split dollar arrangement, we invite you to review our white paper, “A Practical Guide to Accounting for Loan Regime Split Dollar Arrangements.” It will provide clarity of the accounting and disclosure issues, and guidance as to the most favorable plan design.

Loan Regime Split Dollar arrangements have received a lot of publicity recently as an attractive alternative to traditional Supplemental Executive Retirement Plans and other forms of non-qualified deferred compensation, especially among non-profit organizations seeking possible relief from the new 21% excise tax.  Among the frequently cited benefits of such arrangements are the relatively favorable accounting treatment and disclosure requirements.  However, those potential advantages may not be realized unless the program is properly structured and managed.

THE ALCHEMY OF OWNERSHIP—USE PHANTOM STOCK PLANS TO IMPROVE RETENTION AND GROW REVENUE.

If your plan has lost its original intention or effectiveness, we invite you to discuss its structure with EBS during which we may offer modifications to improve its ability to meet shareholders’ objectives and create value for participants.

We’ve updated one of our most downloaded white papers from 2015 concerning the exquisite reality of phantom stock.  It’s our mission to always keep you up-to-date. So, we invite you to download our 2020 edition, expressly for owners of private and closely held companies.

If you only remember these five valuable points, you’ll be ahead of most midsize company owners.

1. Collaborate with executive benefit professionals early in consideration
2. Determine a value formula for the stock and the amounts to issue
3. Design the plan around your corporate objectives
4. Fund the plan, set aside assets
5. Secure the plan with a rabbi trust

TWO WAYS DIRECTORS CAN USE BOARD COMPENSATION TO SAVE FOR RETIREMENT

In this white paper, “Two Ways Directors Can Use Board Compensation to Save for Retirement” we outline how independent directors can establish their own qualified defined benefit or defined contribution plan. We also discuss how to defer Restricted Stock Units into a company sponsored program.

In the late 1990s and early 2000s, many of the pension and benefit programs available to Board Members of public companies were eliminated. But the demands and risks of board membership have intensified, and compensation levels have increased.

Today’s board members receive compensation in the form of equity awards (often as restricted stock units), cash retainers, and meeting fees. Each of these elements can be tax-deferred and serve as the fuel to fund a retirement program.

ENHANCE YIELD, IMPROVE THE BALANCE SHEET AND FUND LIABILITIES WITH INSURANCE COMPANY-OWNED LIFE INSURANCE

Insurance Company-Owned Life Insurance (ICOLI) provides an opportunity for insurance companies to enhance portfolio yields in a manner that is immediately accretive to earnings.

Corporate-Owned and Bank-Owned Life Insurance have long been used as an effective tool for the dual purpose of financing employee benefit liabilities and optimizing the after-tax yield on invested assets. And in this continuing low interest rate environment, insurance companies are finding that Insurance Company-Owned Life Insurance (ICOLI) provides an opportunity to enhance portfolio yields in a manner that is immediately accretive to earnings and has a positive capital impact. The flexibility of the ICOLI structure allows a purchaser to broaden its asset allocation strategy without a negative RBC impact or, perhaps, to simply “clean up” its Schedule BA. As of December 31, 2018, more than a dozen well known insurance companies each reported ICOLI assets in excess of $1 billion.

If you are considering an ICOLI investment or if you would simply like to better understand the potential benefits and the related tax, accounting and regulatory issues, we invite you to review our recently posted white paper, “Enhance Yield, Improve the Balance Sheet and Fund Liabilities with ICOLI”.

INTRODUCING THE NONQUALIFIED PLAN EXIT STRATEGY TO MITIGATE FIVE PERPETUAL RISKS

The NQDC Exit Strategy has the potential to create greater after‐tax income at retirement over what the executive could do on their own using a combination of NQDC distributions and an individual investment portfolio.

A Deal Worth Your Consideration: A carefully structured NQDC Exit Strategy can provide a tax‐efficient alternative to installment distributions from a nonqualified deferred compensation plan. This strategy can eliminate the five significant risks of NQDC plans and put the executive in control of their assets.

Executives can exit heavily taxed retirement benefits for uniquely designed tax‐favored life insurance funded contracts on the life of the executive or the executive and his or her spouse. The Exit Strategy introduces important financial, tax, and accounting considerations potential participants and outside advisers must evaluate.

THE SECTION 162 DEFERRED COMPENSATION PLAN

TAX SAVINGS FOR THE COMPANY, AND ENHANCED BENEFITS FOR KEY EXECUTIVES

Read about this planning strategy in our latest article, “Section 162(m) Deferred Compensation Plans: A Win/Win for Executives & Their Employers.” The article outlines the key provisions required to be included in the plan, and addresses the issue of benefit security of non-qualified plans which, in some cases, is of concern to participants.

Section 162(m), added to the tax code in 1993, was designed by Congress to rein in excessive executive compensation by significantly increasing the after-tax cost of amounts paid to certain key employees above $1 million. However, it proved to be largely ineffective as Compensation Committees continued to set executive compensation at whatever level they felt necessary to provide a competitive total rewards package.

To improve its effectiveness, Congress strengthened Section 162(m) in the Tax Cuts and Jobs Act of 2017 by eliminating an important exception for “performance-based” pay, and by changing the definition of a “covered employee” so that the $1 million deduction limitation continues to apply after retirement.

However, a properly designed (modified) non-qualified deferred compensation plan can be used to mitigate the impact of these new provisions and provide significant tax savings while, at the same time, enhancing the value of benefits to covered executives.

If you listen and enjoy this podcast, don’t forget to check out our webinar that further discusses this topic.