BENEFITS DIGEST

When a life-sciences company sells, what happens to management’s bonuses, options, restricted stock, profits interests and phantom equity turns on what the governing documents say, and Haynes Boone’s checklist walks through each award type. Before a sale process starts, the useful review covers each award’s vesting triggers, change-in-control provisions and tax treatment, because the documents, not the deal announcement, control what management actually receives. The guidance is aimed at retaining executives through a transaction.

Pillsbury explains why UK stock options do not simply carry over when a company reorganizes by placing a new Delaware parent above its UK business. Assumption and exchange are different events, and preserving an option’s economics is not the same as preserving its tax treatment. An option that ends up priced below fair market value after the change can create U.S. deferred-compensation tax problems for employees who relocate to the United States. Board approval and completed grant conditions matter because awards cannot be backdated, and grants above $10 million in a twelve-month period can trigger additional disclosures to the employees receiving them.

The Supreme Court declined on October 13 to hear former Ruby Tuesday executives’ suit against Regions Bank over their deferred compensation. The executives’ money was held in a rabbi trust, whose assets remained available to the company’s creditors in bankruptcy. They received a partial recovery through a bankruptcy settlement, then pursued the bank. The [Sixth Circuit](https://digest.theinnerfirm.com/docs/aldridge-v-regions-bank-opinion-2025-07-17.pdf) held that ERISA displaced their state-law claims and that the monetary compensation they sought wasn’t available under ERISA’s provision for equitable relief. The denial leaves that ruling standing without endorsing its reasoning. For executives, the underlying risk remains worth understanding. Putting deferred compensation in a rabbi trust doesn’t protect it from the employer’s creditors.

Roberts Disability walks through Krambeck v. Unum, a September 30 Florida federal ruling that sends a long COVID disability claim to a bench trial and strips the insurer of two advantages it usually counts on. The policy’s discretionary clause did not require the judge to give the insurer’s decision the benefit of the doubt, because a 2020 restatement reset the policy’s effective date and placed it under Washington state’s prohibition on such clauses. And Unum’s counterclaim to recover $24,000 in benefits after the claimant received a retroactive Social Security award failed, because the money had been spent, leaving no identifiable funds for Unum to recover through that claim. The court also refused to weigh dueling physician opinions on paper, holding that a genuine dispute over how long the claimant can speak in a day belongs at trial. Plan documents age, state insurance regulation moves, and a routine restatement can quietly change which rules govern.

More than 90 former Ruby Tuesday executives lost their supplemental retirement savings when the restaurant chain went through bankruptcy in 2020, and they have been trying to recover the money from Regions Bank, the plans’ trustee, ever since. The Sixth Circuit ended their case by holding that their request for surcharge, meaning compensation for losses allegedly caused by the trustee’s breach of duty, was really a claim for money damages that ERISA does not allow. Invited to weigh in on their Supreme Court petition in Aldridge v. Regions Bank, the Solicitor General filed a brief in late August agreeing that the Sixth Circuit conflated surcharge with damages and got the law wrong, yet urging the Court to deny review anyway. The plans here are top-hat plans for executives, which sit outside ERISA’s fiduciary rules, so the government sees the case as a poor vehicle for resolving when surcharge is available. The justices are scheduled to consider the petition at their October 9 conference. For deferred compensation participants the practical lesson stands either way. Top-hat plans leave executives as unsecured creditors when the employer fails, and the remedies afterward are thin.

White & Case previews the American Rescue Plan Act change that takes effect for tax years beginning after December 31, 2026. The $1 million deduction limit will reach an additional five employees beyond the current covered officers, and the new five need not be officers at all, just the next highest compensated employees, determined fresh each year rather than tagged forever under the once-covered-always-covered rule. Proposed regulations issued in January 2025 would count employees across the affiliated group, including foreign subsidiaries, and certain workers employed through professional employer organizations. Final regulations may or may not land before year-end, but the effective date does not move, so compensation committees modeling 2027 should identify the likely additional five now and consider whether any planned payments belong in 2026.

The ISO rules that trip people up in practice, collected in one place. Incentive stock options can go only to employees of corporations, require stockholder approval within 12 months of plan adoption, and must be designated as ISOs at grant. Favorable tax treatment generally requires holding the shares for more than two years after grant and more than one year after exercise. The annual limit covers options first becoming exercisable on up to $100,000 of stock, measured at its value when granted. Employees owning more than 10 percent of the company’s voting power face additional restrictions, including a higher exercise price and a five-year maximum option term. And if employees will only exercise at an exit and sell immediately, the favorable tax treatment evaporates in the early sale anyway, so plain nonqualified options would have been simpler.

Jay Keeton explains how a tax-exempt or governmental employer can combine a 457(b) plan with a separate 457(f) arrangement to provide additional executive compensation. A 457(b) plan can receive employee deferrals and employer contributions, subject to annual limits. A 457(f) arrangement can promise an additional benefit conditioned on continued service, like the article's example of a $200,000 retention benefit forfeited if the executive leaves within three years. The timing deserves care. The benefit generally becomes taxable income when the executive earns an unconditional right to it, even if payment comes later, so employers should coordinate vesting, payment, and payroll-tax treatment so the executive can cover the resulting tax bill.

The firm closes its six-part series with a checklist of its recommendations for executive pay. Review compensation arrangements before merger talks begin, when planning can still help, rather than at the closing table. Check deferred compensation documents regularly, because operating correctly under a flawed document doesn't prevent tax penalties. Confirm the valuations behind private-company equity awards. And calendar the 30-day window for a Section 83(b) election, the choice to be taxed on restricted equity when it's granted rather than as it vests. That window opens when the equity is transferred, and it can't be reopened. The firm also recommends modeling what executives will actually keep after taxes, since the headline number rarely matches the take-home result.

Employees can lose valuable stock options by missing the exercise deadline, especially after leaving a job, and Cohen & Buckmann writes for both sides of that problem. For companies, expirations create avoidable employee-relations, tax, securities, and administrative problems, and the menu of fixes differs by ownership. Private companies can offer net exercise, loans, repurchase windows, or introductions to secondary buyers, each with cash and disclosure costs, while public companies increasingly set expiring in-the-money options, those that let the employee buy shares for less than their current value, to exercise automatically. Two traps get special attention: an option expiring while the company has no current valuation of its shares leaves both sides guessing at taxes, and a departing employee's post-termination exercise window can shrink a ten-year option to a few months of decision time. For executives the advice is a checklist: before resigning, confirm the expiration date, how many options they can exercise, and the exercise mechanics, and remember the tax due at exercise can far exceed the exercise price.

A year-end checklist for companies that sponsor retirement plans and executive pay arrangements. On the plan side, amendments documenting optional SECURE and SECURE 2.0 changes already in operation are due December 31 for calendar-year plans, while required changes can have later deadlines. On the executive side, three items reward attention before year-end. Social Security and Medicare taxes on deferred compensation are generally owed when the pay vests, not when it is paid, so amounts that vested in 2026 need payroll taxes handled by December 31. Elections to defer pay earned in 2027 must also be made by December 31, with narrow exceptions. And documentary problems in deferred-compensation arrangements can often be corrected without penalty if caught before the amounts vest, which makes a year-end review worth scheduling. Public companies should also confirm that equity-plan share reserves will cover grants planned through 2028.

For tax-exempt organizations in related groups, "who is the employer" is a question with new stakes. Related nonprofits are treated as one employer when at least 80 percent of one organization's directors or trustees are representatives of, or removable by, the other. A management company that runs a nonprofit's operations on a continuing basis can also tie the organizations together under separate affiliated service group rules. Getting the answer right matters more now because Congress amended the excise tax on nonprofit executive compensation in 2025 to cover a broader group of employees, with the IRS's initial reading in [Notice 2026-36](https://www.irs.gov/pub/irs-drop/n-26-36.pdf). Because pay counts across related organizations, identifying the full group is the first step, and the same analysis drives combined plan testing and the reporting of related entities on Form 990.

A year-end checklist for the nonprofit and governmental slice of the audience. It covers amendment deadlines (December 31, 2026 for most qualified plans; governmental plans get until 2029), the Roth catch-up requirement for employees with more than $150,000 in prior-year FICA wages from the sponsoring employer, the new paper benefit-statement requirement for ERISA plans, and year-end tax decisions for certain deferred compensation arrangements. One distinction to carry into the review: amendments documenting optional changes already in use are on the year-end clock, while required amendments may have later deadlines.

A read of the settlement agreement and supporting declaration filed September 3 fills out the picture behind the $5.55 million Russell family settlement reported yesterday. All four settlements in the case, counting the earlier deals with Denise Wyatt, Dennis Long, and Argent Trust, total $14.55 million. The parties had stipulated that the plan's direct losses from the conduct on which the Russells were found liable came to $2,998,716.55, so the family's payment alone runs to nearly twice the stipulated direct loss. The agreement certifies a mandatory non-opt-out class of 394, funds in two equal installments tied to preliminary and final approval, lets class members elect tax-qualified rollovers, and sends any unclaimable residue to a nonprofit rather than back to the defendants. The release reaches the 2016 redemption transaction, the clawback agreement, and the Siemens sale proceeds.

Three SEC rulemakings went to the White House for review in the last week of August, and all three target October release. One would reform executive compensation disclosure, following Chairman Atkins' push to simplify the regime. Another carries a title worth reading twice, rescission of Rule 14a-8's federal regulation of shareholder proposals, which suggests a rethink of the shareholder proposal system rather than a tune-up. Public companies should expect a different-looking proxy season.

In Sleep Number's chapter 11, the Bankruptcy Court for the Southern District of New York held that roughly $17.6 million in the company's deferred compensation rabbi trust is property of the estate, leaving plan participants to file general unsecured claims alongside other creditors. The decision underscores that a rabbi trust shields deferred compensation from the employer's change of heart, not from the employer's insolvency.

Cooley adds the timing read on the SEC's executive compensation disclosure proposal now at OIRA. The office's review often takes a fraction of its allotted 90 days, so a formal proposal could surface within weeks.

On August 26, 2026, the SEC submitted a rule proposal titled "Executive Compensation Disclosure Reform" to the White House's Office of Information and Regulatory Affairs. SEC rulemaking initiatives under review by OIRA are listed on a dashboard until the review is completed.

Hall Benefits Law's half-year policy roundup names four developments: the DOL's proposed safe harbor for fiduciaries selecting 401(k) investments, EBSA's shift to fewer but more participant-focused enforcement interactions, SEC moves to streamline executive compensation disclosure by company size, and EBSA's technical release that ERISA Title I generally does not apply to Trump Accounts. A mixed but useful mid-year checkpoint for benefits and executive compensation practice.

The fifth installment of the firm's executive-pay series covers the contractual frame from hiring through departure: employment agreements, severance design, and the Dodd-Frank clawback rules now binding on all listed companies.

The Northern District of Georgia preliminarily approved a $47.7 million settlement of claims by roughly 189 former NCR executives and their beneficiaries over a top hat plan. Groom's lesson for nonqualified plans: section 409A compliance does not excuse departing from what the plan document promises.

Boutwell Fay's FAQ on the section 4960 excise tax for tax-exempt employers: who counts as a covered employee, how the $1 million threshold and parachute rules interact, and the traps for organizations with related entities.

Part four of the firm's executive-pay series reaches section 280G: how golden-parachute payments trigger the excise tax, the shareholder-approval escape hatch for private companies, and the planning that has to happen before a deal is on the table.

Part 3 of the firm's executive-pay series turns to nonqualified deferred compensation and section 409A, following earlier installments on stock options, restricted stock, RSUs, phantom stock, SARs, and the 83(b) election.

The fifth installment in the firm's executive compensation series turns to employment agreements, severance, and clawback provisions, following earlier parts on equity compensation, deferred compensation, Section 409A compliance, and the Section 280G golden parachute rules.

Although the dispute unfolded against the backdrop of Code Section 409A’s plan termination rules, the bottom line for plan sponsors is this: top hat plans are unilateral contracts that employees accept through performance, and once accepted, the express terms of the plan document govern.

On Friday, July 3, Treasury posted its 2026 regulatory agenda, which includes the following retirement and executive compensation items.

The IRS recently announced its intention to propose regulations relating to the 21 percent tax imposed with respect to any “excess” executive compensation paid by certain tax-exempt organizations.

In Part 1, we introduced the executive compensation landscape and examined incentive stock options (ISOs) and nonqualified stock options (NQSOs).

The Internal Revenue Service (“IRS”) released Notice 2026-36 (Notice of Intent to Issue Regulations under Section 4960), (the “Notice”) relating to the tax on executive compensation under Internal Revenue Code (“Code”) Section 4960, as modified by the One Big Beautiful Bill Act (the “OBBBA”)

Section 409A of the Internal Revenue Code (Section 409A) imposes strict rules governing the timing of deferred compensation payments, such as when and under what circumstances such payments can be made.

Fifteen states now have some automatic enrollment of public sector employees, but nearly half of US states prohibit it.

On Friday, July 3, Treasury posted its 2026 regulatory agenda, which includes the following retirement and executive compensation items: Final regulations Required minimum distributions (“RMDs”) as

Disclosure for Most Public Companies- On May 19, 2026, the Securities and Exchange Commission (“SEC”) released proposed amendments