How Leading Organizations Design, Deliver and Defer Incentive Compensation Plans. 

In this discussion, recorded live on February 24th, we hear from Dan Walter from FutureSense and Don Curristan of Executive Benefit Solutions (EBS).  Trevor Lattin, also from EBS, joins as the moderator.  All experts in the space of executive benefits and executive compensation, as well as the firms they represent.

2021 is a unique year.  And 2020 was an even more unique year.  Here’s our best attempt at consolidating the changes and trends we’ve seen related to compensation.  We discuss public, private, and not for profit organizations and unique ways their corporate structures can impact planning/ design as well as specific trends.

Dan spoke on incentive plans.  He was quick to remind us that, when properly used, incentive plans can help privately held companies compete against publicly traded firms.  How do they possibly compete with the giant mammoth firms?  They put in a plan designed particularly for their intentions, simply because they can.

Another major issue with compensation that Dan brought up was the question of whether you need more than one instrument.  Too often, we see companies lean completely and solely on one option (whether it’s stock options, deferred compensation, or cash).  This is a major concern, as it limits the balance in the company’s future.

Which led us to the question of how to create that balance?  Or how do we know what the right balance or amount really is?

Dan’s advice: ask everyone what they think they should get and give them that amount because nobody ever exaggerates what they’re worth. 

So, you’ve worked to set up the perfect program based on your company’s goals and provided employees with incentives.  But what happens to the incentive when the employee is faced with a potential tax impact?  Can incentive plan compensation be deferred?

Yes, but you have to be very thoughtful in how you do that – according to Don.  Listen to the recording to find out how Don and EBS have worked with clients to structure programs that allow for deferral, and mitigation of a tax event.  Clients can build their program around their goals and set it up to payout at a certain point.

Why isn’t it one size fits all?  Options depend on the ownership and tax structure of the company and differ across public, private, and not for profit organizations.

Our last topic of discussion we promised to include in the event was, what is the effect of proposed Biden tax law changes on incentive and deferral plans?

Hear from Don on why we might have to wait patiently to get our answer on the timing and implementation of any changes.  One thing we might expect to see (if history repeats itself) is a grandfathering provision in connection with any legislative changes that impact deferred compensation.  But it’s still too early to know.