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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The IRS has provided guidance on the issue of whether dividends and dividend equivalents relating to restricted stock and restricted stock units (RSUs) that are performance-based compensation under Code Sec. 162(m)(4)(C) must separately satisfy the requirements of that section to be treated as performance-based compensation.
A publicly held corporation may deduct compensation paid to employees, but that deduction is limited to $1 million in the case of payments of "applicable employee remuneration" made to "covered employees" (i.e., the chief executive officer (CEO) and the four highest-paid employees of the corporation other than the CEO). Compensation is excluded from this definition (and therefore does not count toward the $1 million limit) if it is paid on account of attainment of performance goals that meet certain conditions.
The IRS concluded that grants of dividends (or equivalents) are separate and apart from the related restricted stock or RSUs, and so the dividend grants must separately satisfy the above conditions in order to be excluded from applicable remuneration.
Source: IRS Rev. Rul. 2012-19.
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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