The name “executive compensation” is somewhat misleading, as one does not need to be an executive to receive such benefits. “Specific employee compensation” is a more accurate title, though admittedly not as catchy. Executive compensation deals with certain benefits paid only to a specific employee or group of employees, such as middle management figures or high-level officers.
Executive compensation is not as heavily regulated under ERISA as retirement and healthcare plans, creating the opportunity for great flexibility in the type of compensation an employer may offer. That being said, less regulation under ERISA often comes at a price of greater regulation elsewhere and a lack of the traditional tax benefits associated with deferred compensation. Rigorous tax laws such as Sections 409A and 457(f) carry steep penalties for noncompliance which affect both the employer and the employee, creating a definitive need for consultation with employee benefits attorneys when creating and implementing an executive compensation scheme.
Here is a list of some of the most common types of executive compensation available:
Nonqualified defined contribution or defined benefit plans
Corporate owned life insurance (COLI)
Bank owned life insurance (BOLI)
Stock awards (restricted and unrestricted)
Stock options (incentivized stock options and nonqualified stock options)
Stock appreciation rights (SARs)
The availability of choices is quite broad, and each of these choices offers its own set of tax, accounting, employee satisfaction, shareholder satisfaction, and compliance implications. The flexibility of arrangements can be almost daunting in its own regard, which is why a benefits attorney can used to cut through these options and select the best choices for certain employees in certain situations.