The NASPP Blog

Monthly Archives: June 2014

June 30, 2014

CT Chapter Meeting and Brewery Tour & Tasting

The Connecticut chapter hosts a chapter meeting at Two Roads Brewing Company.  The meeting will start with a presentation by Gary Scrofani and Marsha Tepper of CompIntelligence on “Manual Manipulation Madness,” which will be followed by a tour of the brewery and beer tasting.  (Tuesday, July 1, 3:00 PM)


June 26, 2014

Short-Term Travel, Long-Term Consequences

We are excited to bring our popular “Meet the Speaker” series back to the NASPP Blog, featuring interviews with speakers at the 22nd Annual NASPP Conference.  This is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.

For this week’s Meet the Speaker interview, we feature Cathy Goonetilleke of Ernst & Young, who will lead the session “Short-Term Travel, Long-Term Consequences: Focusing on Payroll Taxes for Business Travelers with Equity.”

NASPP: What are you planning on covering during your session?

Cathy: Companies are now taking mobility to the next level and addressing the next tier of risk associated with business travelers holding equity awards.  We are going to share some of the challenges and considerations that leading companies have experienced during this journey.

NASPP: What actions should companies be taking now with respect to business travelers?

Cathy: Companies should be educating themselves on the current domestic and global risks.  They should be trying to quantify the exposure they have today and project for the next several years.  From this, they can make decisions on policies and an approach forward.

NASPP: What is the silver lining here?

Cathy: If you haven’t fully tackled this, you are far from alone.  However, it is trending as the next wave in audits and compliance efforts.

NASPP: If you had a store on Etsy, what would you sell in it?

Cathy: Probably short stories for children.  I really enjoy making up stories with my daughter to teach, entertain and humor her.

Don’t miss Cathy’s session, “Short-Term Travel, Long-Term Consequences: Focusing on Payroll Taxes for Business Travelers with Equity,” at the 22nd Annual NASPP Conference. I expect that she has some great stories to tell on this topic.

– Barbara

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June 25, 2014

NASPP To Do List

Time Is Running Out!
There are just a couple of weeks left to take advantage of the discounted pricing for the 22nd Annual NASPP Conference and our newest online program, “Performance Award Essentials.” Don’t miss out–register for both programs by July 11.

Here is your NASPP to do list for this week:


– Barbara


June 24, 2014

409A Audits

The IRS has announced an audit initiative focused on Section 409A compliance.  Frankly, I’m a little surprised that they haven’t undertaken this sort of audit initiative sooner–I’ve heard from practitioners that, up until now, Section 409A has rarely been a focus of IRS audits.  Given the complexity of this area of the tax code and the fact that every time I have a question about it, my sources never seem to be entirely sure of the answer (and I sometimes get conflicting answers), it seems like 409A could be an untapped wealth of compliance errors for the IRS.

Who Are the Lucky Winners?

Some companies are just lucky.  The IRS has picked 50 companies to be the subject of the audits, all of which have already been selected for employment tax audits–I guess the IRS is a believer of “when it rains, it pours.”  The good news is that if you haven’t already been selected for an employment tax audit, you won’t be part of the initial 409A audit initiative.

What Is the IRS Looking For?

The audits will focus on deferral  elections (both initial deferrals and re-deferrals) and payments (including  payments to key employees upon separation of service). It’s pretty rare that we see deferral elections for stock compensation; only 29% of respondents to the NASPP’s 2013 Domestic Stock Plan Design Survey (co-sponsored by Deloitte Consulting) allow deferrals for time-based RSUs and only 24% allow deferrals for performance awards.  Based on this, it seems that the audits will concentrate primarily on more traditional NQDC plans,  rather than stock compensation.

This seems like a missed opportunity for the IRS–I’ve always found the application of Section 409A to  stock compensation to be particularly confounding and full of traps for  the unwary.  Moreover, I think this is an area of the tax code that often is overlooked when we are thinking about potential concerns related to stock awards.  But perhaps the IRS will expand to stock compensation in the next phase of the audit initiative.

The Next Phase?

I say “next phase” because this could be a precursor to a larger, more intensive audit of Section 409A compliance.  In a memo on the initiative, Groom Law Group says “The IRS will assess what further steps, if any, to take after the results of these audits are in.”   Now is a good time to get out ahead of this and perform your own self-audit of 409A compliance.  In his blog on, Mike Melbinger of Winston & Strawn points out that there is a corrections program available for some operational errors under 409A, but that the corrections program is no longer an alternative once you are the subject of an audit.

For more information, see the NASPP alert “IRS Conducting 409A Audits.”

– Barbara

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June 23, 2014

NASPP Chapter Meetings

Here’s what’s happening at your local NASPP chapter this week:

Boston: Michael Andresino of Posternak Blakenstein & Lund, Christine Cognetti and Richard Fischer of Morgan Stanley present “Rules 10b5-1 and 144 and Section 16 – Issues, Trends and Best Practices.” (Wednesday, June 25, 4:00 PM)

Chicago: Mike Melbinger of Winston & Strawn presents “Ethical Issues in the Executive Compensation Area, Including the “Independent Counsel” Provisions of the Dodd-Frank Act.” (Wednesday, June 25, 7:30 AM)

Los Angeles: Mark Chen and Dan Mumenthaler of Towers Watson present “Crosscurrents Reshaping Executive Pay and Equity Compensation.” (Wednesday, June 25, 11:30 AM)

San Diego: Roger Gilbert of EASi presents “The Treatment of Equity Awards Upon Termination.” (Thursday, June 26, 11:30 AM)

Las Vegas: Michael Oclaray and Carl Schmitt of Towers Watson present “Crosscurrents Reshaping Executive Pay and Equity Compensation.” (Wednesday, June 27, 11:30 AM)


June 19, 2014

5 Things to Consider in Implementing a Performance Plan

With the influence of Say-On-Pay and heightened shareholder scrutiny, the use of performance-based equity has become a popular tool for companies to reward/incent executives and employees.  Designing, administering and accounting for these awards can be dramatically different than traditional time-based awards.  Here are five things you need to consider to effectively launch and administer a performance awards plan (even if you’ve already launched a performance plan, you still want to make sure these areas are well addressed):

  • What type and size of awards will you grant?  An option award is typically sized much differently than a restricted stock award.  Currently, the most common performance award type is restricted stock units.  Or maybe your company would consider a combination of several types of awards?
  • What type of metrics will you use to measure performance? Financial or strategic goals, market based measures, or some combination?  You’ll need to consider what type of performance you’re trying to motivate, what the market looks like for your company and perhaps what competitors are doing as well.
  • Determination of achievement – who will certify that the achievement has been met, the Board or a committee?  The “vesting” date arrives – now what?  You’ll need to track how the performance measures up with the goals and present all the data to the person(s) responsible for making a final determination. Who is going to keep track of the performance metrics so that prompt attention is given when a goal or objective is achieved?
  • Accounting – Depending on the type of award and the metrics associated with earning the award, the valuation and amortization of the expense can pose some tricky challenges. You’ll want to seek input from any internal and external accounting partners during the plan design phase to ensure the nuances of the plan don’t trigger any unanticipated accounting ramifications.
  • Communication to participants—if you thought communicating equity awards to employees was difficult—introduce a performance element!  Clear, concise information to participants is critical – the awards aren’t an incentive if the employee doesn’t understand them! We’ve seen companies do everything from the standard emails and printed materials, to allowing participant access to a website that tracks performance metrics and shows the present value of the performance award.


If you’re sweating profusely because your boss just told you the company is considering a performance plan – you’re in luck.  The NASPP has developed a brand new online course, Performance Award Essentials.  This course will provide a “nuts and bolts” study of performance awards, giving you the tools and understanding you’ll need to account for, administer and report on these challenging new awards. A special thanks to our own Kathleen Cleary, NASPP Education Director, for providing the content for today’s blog.


June 18, 2014

NASPP To Do List

Performance Award Essentials
The NASPP’s newest online program, “Performance Award Essentials” will provide you with a crash course in the core knowledge you need to administer these complex and ever more popular vehicles.  Register by July 11 for the early-bird rate.

Here is your NASPP to do list for this week:


– Barbara


June 17, 2014

10b5-1 Plan Twists & Turns

We are excited to bring our popular “Meet the Speaker” series back to the NASPP Blog, featuring interviews with speakers at the 22nd Annual NASPP Conference.  This is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.

For our first Meet the Speaker interview, we feature Mike Andresino of Posternak Blankstein & Lund, who will moderate the session “10b5-1 Plan Twists & Turns.”

NASPP:  What is the most critical thing NASPP Conference attendees need to know about Rule 10b5-1 plans?

Mike: If your company does not yet use 10b5-1 plans as part of its insider compliance program, you are missing out on an important tool.  If you do use these plans, there are important best practices that companies ignore at their peril.

NASPP: What are some best practices companies should implement for 10b5-1 plans?

Mike: Companies need to address, up-front, the expectations that plan participants should have regarding issues such as suspension, amendment or termination of 10b5-1 plans, SEC disclosure of their plans, price targets and other hot button issues that are not addressed in the 10b5-1 regulations but are part of the administrative environment for the plans.

NASPP: What is the worst horror story you have heard about a 10b5-1 plan gone wrong?

Mike: Angelo Mozilo, former CEO of Countrywide Financial, agreed in 2010 to a $67.5 million settlement with the SEC over charges that he abused his 10b5-1 plans for trading gains.  If I’m trying to get directors and officers to pay attention to compliance issues, sixty-eight million bucks will usually do it!

NASPP: And last, just for fun, if you had a store on Etsy, what would you sell in it?

Mike:  One word–Marinade!  More specifically, I would bottle and sell a marinade that I use for salmon and other fish, that uses oil, soy sauce, honey and dark rum.  Maybe I would package it in a kit with the rub I use.  Hmm, now I just need a good design for the bottle….

Don’t miss Mike’s session, “10b5-1 Plan Twists & Turns,” at the 22nd Annual NASPP Conference.  Who knows, maybe he’ll have some bottles of marinade available (or maybe you can “twist & turn” his arm for the recipe)?

– Barbara


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June 16, 2014

NASPP Chapter Meetings

Here’s what’s happening at your local chapter this week:

Atlanta: Kerri Mckenna  of PriceWaterhouseCoopers  presents “Cost Basis Reporting and Equity-Based Compensation.” (Wednesday, June 18, 11:30 AM)

Denver: Jack McArthur of Radford Aon Hewitt presents “So ESPPs Aren’t Dead After All?” (Thursday, June 19, noon)

SacramentoThe chapter hosts its first wine excursion–to Boeger Winery! Jim Vincent of E*TRADE and Denise Scoville-Glacken of EASi will moderate roundtable discussions on “Do’s, Don’ts and Lessons Learned,” “Grant practices: Trends and Fads,” “ESPP – Qualified vs. Non-Qualified,” and more! (Thursday, June 19, 11:30 AM)

Wisconsin: Emily Cervino of Fidelity presents “Lights, Camera, Action!  Viral Videos in Stock Compensation.” (Friday, June 20, 11:45 AM)

– Barbara

June 13, 2014

Scenes from the Silicon Valley All-Day Conference

In a rare Friday entry to the NASPP Blog, I offer a few scenes from this week’s Silicon Valley NASPP Chapter All-Day Conference. Kudos to Inta Abele, the chapter president, and the rest of the chapter board for hosting a great event.

???????????????????????????????Dee Crosby of the CEP Institute, Valerie Diamond of Baker & McKenzie, and Andrea Kagan of KPMG presented the afternoon keynote, “The Boomers are Coming! The Boomers are Coming!”  After their presentation, they happily took questions from audience members. Seriously–look how happy Dee is!

???????????????????????????????Attendees listen intently to the keynote presentation.

???????????????????????????????Thanks to all of the event sponsors for supporting the chapter and helping it put together such a great event. Many of these companies sponsor this event for the chapter every year.

???????????????????????????????Megan Buckley of Ruckus Wireless, Loretta Gardner Miller of Castlight Health, Joan Matlack of Matlack Consulting, and Anamika Mandal of ETRADE. Often when I go through photos from an NASPP event, I realize that in every photo, everyone is from the same company. That was not the case today; this was a very gregarious group and everyone took full advantage of the opportunity to catch up with colleagues and friends in the industry.

???????????????????????????????Stock & Option Solutions always has great tchotchkes (yes, that is how you spell that word) at their booth.  This year they again had the boogie bot (in black–collect all three colors!) as well as a number of other nifty trinkets.

???????????????????????????????The hotel had a jail cell set up in the lobby, presumably in case any of the event attendees got out of hand, not that this would ever happen at an NASPP event. (Actually the cell was part of an exhibit on Alcatraz.)

???????????????????????????????Takis Makridis of Equity Methods and Dave Thomas of Wilson Sonsini presented “Pulling Levers to Maximize Value in a Compensation Plan Design.”  They had the most colorful slides.


???????????????????????????????The day concluded with the traditional cocktail reception.  Here attendees mingle at the reception while waiting for raffle winners to be announced.

???????????????????????????????The chapter president, Inta Able of Schwab, and vice president, Sorrell Johnson of NetApp, announce a raffle winner.  Kudos the Inta, Sorrell, and all of the chapter officers for hosting a great event again this year.

See more pics of the event on the NASPP’s Facebook page.

– Barbara