The Senate and House approved, and the President of the United States is expected to sign into law, the Tax Cuts and Jobs Act1 (the “Tax Reform Bill”). Despite the media’s predominant focus on the sweeping reforms to individual and corporate income taxation, the Tax Reform Bill includes significant changes in the areas of (i) Executive Compensation; (ii) Qualified Retirement Plans; and (iii) Health, Welfare and Fringe Benefits.
The following is a discussion of a few of the significant changes in these areas2:
I. Excessive Employee Remuneration – Publicly Held Corporations (Internal Revenue Code Section 162(m))
Pre-Tax Reform Bill:
- A publicly held corporation may not deduct payments to its CEO and three highest-compensated executive officers (other than the CFO) to the extent that those payments exceed $1 million; provided, however, certain performance-based compensation and commissions are excluded from the compensation subject to the $1 million limit.