Has there ever been a more important time than now for companies and executives to make strategic executive comp decisions? No, there hasn’t, but the key word here is “strategic.”
If you believe everything you read or hear from the media, then you have the misperception that a narrow margin of votes in Georgia has changed the direction of the United States.
In reality, the votes from Georgia are no more or less important than any other votes cast in this year’s elections. The Georgia runoff elections just kept us hanging on longer than usual for a final decision that we all hope, accurately represents the voice of American voters nationwide.
It’s been two decades since we’ve had an evenly divided 50-50 chamber. In fact, it’s only happened three times in the history of the United States Senate, in 1881, 1953, and briefly following the 2000 election from 2001 until 2002 when Republicans won back the majority.
In her role as president of the Senate, Vice President-elect Kamala Harris is positioned to cast a critical tie-breaking vote when necessary. Yes, this means she can determine the outcome of judicial appointments, including Supreme Court openings should the need arise. But it doesn’t mean she will likely be the pivotal decisionmaker for the bulk of legislative actions, given that in the Senate, most bills require a 60-vote majority. While some lawmakers are calling to change that rule, there would be many hurdles to overcome in that process.
Regardless of their personal political preferences, corporate leadership and key executives all need to adopt a strategy-first agenda.
Neither Pandemics nor Politics Should Lead to Impulsive Changes in Your Executive Comp Plans
From the economy to politics to the pandemic, 2020 has given companies more than enough reasons to strategically assess their executive compensation plans. Decisions regarding deferred compensation and other aspects of executive benefits planning should not be made because you fear stocks will be volatile or as an impulsive reaction to anticipated tax law changes.
However, executives and compensation committees need to acknowledge that there is no reason to anticipate an extension of the tax rates (set to expire after 2025) that are part of the Tax Cuts and Jobs Act. If President-elect Joe Biden succeeds in implementing the tax agenda he revealed during the election, corporate and personal tax rates will increase, estate tax limits will decrease (creating higher levels of estate taxes) and Social Security thresholds will be expanded above the current $142,800 cutoff.
Each of these actions, along with many other changes that may occur, confirm that the landscape for deferred compensation and retirement planning is changing. But executives and organizations do have options.
What should be your first strategic step as a highly compensated executive (HCE) or key decisionmaker?
Contact an experienced executive benefits consultant and learn how to make thoughtful and calculated adjustments as they are available to you and your organization.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.
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