American Benefits Council
Benefits Byte

2015-072

July 2, 2015

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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SEC Issues Proposed Executive Compensation “Clawback” Rules

The U.S. Securities and Exchange Commission (SEC) issued proposed rules to require companies to establish policies to recover erroneously-awarded compensation to executives, also called a “clawback.” The rules, released on July 1, would implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, and would apply to the three fiscal years prior to when the company is required to file a restatement.

The proposed rules apply to “executive officers,” defined as the president, chief financial officer, chief accounting officer and vice presidents in charge of business units, as well as those who craft company policy. That proposed definition is broader than the Sarbanes-Oxley Act’s (SOX) clawback provision, which would only reach back one year.

The rules would direct the national securities exchanges and national securities associations to establish “listing standards that would require each issuer to develop and implement a policy providing for the recovery, under certain circumstances, of incentive-based compensation based on financial information required to be reported under the securities laws that is received by current or former executive officers, and require the disclosure of the policy.” The rules are aimed at recovering awarded compensation that exceeds what should have been paid according to an accounting restatement, if the restatement is required because of “material noncompliance” with securities laws.

Non-compliance with the rules could result in a company being delisted from national securities exchanges. Erroneous compensation would have to be recovered, regardless of the executive officer's accountability for any misconduct or responsibility for the incorrect financial statements. Companies would also be forbidden from exempting officers from recovery.

The proposed rules follow April 29 proposed rules that would require public companies to disclose the relationship between “executive compensation actually paid” and the financial performance of the company for select employees, implementing relevant provisions of the Dodd-Frank Act. These actions reflect continued efforts by the SEC to tie executive compensation more closely to actual financial performance of the company.

For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.



The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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