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Executive Compensation Plans

Executive compensation has become an integral part of hiring and retaining talented executives. This can take the form of deferred compensation plans, defined contribution and defined benefit plans, and/or supplemental executive retirement plans (“SERPs”). However, the establishment and funding of those plans can take a number of forms, and involve a number of tax, contract, regulatory, and finance issues which require careful attention.

The differences in funding, between traditional investments (and otherwise impermissible investments), COLI (corporate owned life insurance), split-dollar plans, and other mechanisms each carry with them compliance issues, but can also carry with with concentration and strategic risk concerns. Without careful attention to the funding mechanism and plan, establishment of a deferred compensation arrangement can prove to be an albatross, rather than the benefit an employer intends.

The drafting of a deferred compensation plan, and an executive’s employment agreement, can also involve complex and delicate issues. Formulas for compensation must be drafted with numerous scenarios in mind, and with a view often far into the future.

Regulatory issues regarding the basis for compensation also closely affect plans. For example, credit unions are prohibited from compensation of executives based on loan activities and other bases. Any variable compensation is under scrutiny for perverse incentives and excessive compensation under Dodd Frank.

SW&M attorneys have broad-based experience in working with many of the industry players and providing advice regarding executive compensation plans. As a result, we have had the opportunity to analyze issues, provide advice, draft documents, and negotiate positions on behalf of numerous credit union clients.