Executive Compensation

The Executive Compensation Team frequently negotiates and drafts employment agreements for executives, addressing such issues as restrictive covenants and anti-solicitation and confidentiality provisions; welfare benefits; change of control provisions dealing with severance payments and accelerated vesting and funding of nonqualified deferred compensation and equity compensation awards; full and partial gross-ups for the payment of the excise tax on golden parachute payments; and contest provisions dealing with the assessment of the excise tax by the IRS.

We design and draft a wide array of equity-based compensation plans, such as nonqualified stock options, incentive stock options, phantom stock plans, restricted stock plans, and stock appreciation rights. We also design and draft nonqualified deferred compensation plans, including defined contribution plans with employer contributions and employee salary and bonus deferrals, defined contribution salary reduction plans linked with qualified 401(k) plans, and defined benefit offset plans. In addition, Gibbons drafts for publicly-held companies employee stock purchase plans under Section 423 of the Internal Revenue Code. We also have an extensive practice representing tax-exempt organizations, such as hospitals and universities, and drafting ineligible Section 457(f) plans for their executives.

The Executive Compensation Team at Gibbons regularly designs and drafts qualified defined contribution plans, with an emphasis on 401(k) plans. We also have experience in the conversion of defined benefit plans to cash balance plans. Our attorneys prepare applications for determination letters and handle nondiscrimination issues arising from aggregation of plans and separate lines of business. We also prepare applications under the Employee Plans Compliance Resolution System to correct errors in plan administration. With respect to plan administration and the investment of plan assets, we negotiate directed trustee and record-keeping agreements with banks, insurance companies, and mutual fund complexes for 401(k) plans, and investment management agreements for defined benefit plans. Gibbons counsels trustees of defined benefit plans and investment advisors and providers, such as financial institutions, on unrelated business income tax and prohibited transaction issues for investments of plan assets.

In recent years, we have addressed the issues of plan coverage of leased employees and other temporary or contingent workers and have drafted plan amendments for exclusion of these workers. Our firm also represents employers in employment tax audits dealing with issues of worker classification. Finally, we have conducted plan audits of qualified and nonqualified retirement plans for compliance with plan terms, the Internal Revenue Code, and ERISA.

In negotiating compensation packages for high-level executives, ensuring that the publicly-held employer is entitled to the compensation deduction under Section 162(m) of the Internal Revenue Code is of the utmost importance. Gibbons attorneys work to have the entire compensation package treated as fully deductible, performance-based compensation and to draft the appropriate disclosures of the compensation package for shareholders to approve at their meetings. We also counsel boards of directors as to who can serve as outside directors on compensation committees for purposes of Section 162(m).

A major part of our practice involves negotiating and drafting representations and warranties regarding compensation arrangements and welfare benefit plans in merger and acquisition agreements. We address issues concerning level of the representation and warranty given, such as unqualified, and to the best of the seller’s knowledge. Our attorneys review the deal structure to determine whether it triggers any COBRA obligations (and, if so, which parties are primarily and secondarily responsible for these obligations), withdrawal liability under the Multiemployer Pension Plan Amendments Act, severance payments, and the excise tax on golden parachutes under Code Section 280G. We also review nonqualified deferred compensation plans and equity compensation plans to determine whether the transaction triggers any change of control provisions and accelerated vesting and funding provisions. Further, the Gibbons Team will review group health plans to determine whether any change of control provisions entitle the insurer to terminate coverage or increase premiums. Finally, with respect to all deferred compensation and welfare benefit plans, we review the plans to determine whether the acquirer can amend or terminate the plans without any increase in benefits and additional funding obligations. After the merger or acquisition, our attorneys advise clients on integrating employee populations and their compensation and benefits to achieve corporate planning goals and satisfy the requirements of the Internal Revenue Code and ERISA.