MADISON, Wis. - Credit unions won't be affected by the recent recommendations from the SEC to publicly-traded companies to fully disclose what their executive compensation packages look like, but members will probably be able to make more informed decisions as a result. The SEC has outlined a litany of proposed changes it would like to see at publicly-traded companies. Specifically, "in plain English," the agency has suggested disclosing executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors in a company's proxy statements, annual reports and registration statements. While credit unions will not be impacted by these proposals, members as investors may be able to make more informed decisions, said Joe Tripalin, vice president of executive benefits, CUNA Mutual Group. "(The SEC) is trying to propose ways the public can have this kind of information and the confidence to make sound decisions in investing," Tripalin said. The lavish compensation packages given to executives at Enron, WorldCom, Tyco, Adelphia and others eventually prompted the SEC to call for more disclosures on what they earn. "There was little disclosure to the investing public. The SEC wants to tighten it up," Tripalin said. Currently, companies are required to report a lump sum if an executive's perks are more than $50,000, or 10% of his or her salary and bonus. Under current rules, an individual perk has to be reported only if it represents more than 25% of all the perks that an executive receives. Under the proposal, perquisites must be itemized if they total $10,000 or more. The proposed new rules would outline the defined-benefit and defined-contribution retirement plans of top officers. It's been 14 years since the SEC has undertaken significant revisions of its rules for executive compensation, SEC Chairman Christopher Cox said. During that time the compensation packages awarded to directors and top executives "have changed substantially." "Our disclosure rules haven't kept pace with changes in the marketplace, and in some cases disclosure obfuscates rather than illuminates the true picture of compensation," Cox said during a Jan. 17 meeting. Tripalin said another agency, the IRS, and its implementation of the new 409A tax code "was a direct result of abuses in deferred compensation arrangements." "Unfortunately, it spilled over to credit unions," Tripalin said. "But, it has had very little impact on their (deferred compensation) programs." The American Jobs Creation Act, signed into law by President Bush on Oct. 22, 2004, has substantial rulings relating to non-qualified deferred compensation plans through IRS Code Section 409A. The code establishes specific requirements that certain deferred compensation plans must meet to receive tax deferral treatment. Under those rules, credit unions that maintain 457 (f) plans will be subject to 409A rules, although 457 (b) programs are specifically exempt. Credit unions have until Dec. 31, 2006 to make any changes. Participants who have made elections as to the form and timing of distributions under a deferred compensation plan may change those elections up to Dec. 31, 2006 without being subject to 409A restrictions. However, under this extension an individual cannot in 2006 change payment elections with respect to payments that would otherwise have been received in 2006, or cause payment to be made in 2006 that otherwise would have been paid later. Meanwhile, the SEC's proposal regarding more disclosure of executive compensation packages may mean more accountability is coming. "We may see more of these kinds of (disclosures)," Tripalin said. -firstname.lastname@example.org
New Proposed Executive Compensation Disclosure May Allow Members to Make More Informed Investing Decisions
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