Are Your Compensation Programs No-DOMA Ready?

Are Your Compensation Programs No-DOMA Ready?

First, congratulations to
everyone who can now legally experience what is the best thing about my life,
marriage. A quick shout of support for those still fighting on this front.

Second, over a month ago,
Section 3 of the federal Defense of Marriage Act (DOMA) was ruled
unconstitutional. This means that a marriage legally performed in any state
must be recognized at the federal level. You may have considered what this
means for your friends and employees affected, but have you considered what
this means for your compensation plans?

Let’s be honest, when it
comes to a showdown between personal freedom and your compensation documents,
documents are always the higher priority! In this case, you need to review
every plan, agreement, SPD and communication for the term “spouse”. You also
need to review the same for every possible euphemism that has been created to
avoid using the word spouse. For every instance you will need to determine,
with your legal counsel, what needs to be done.

How will beneficiary forms be
modified? Will you need new information (immediately)? What happens in a
divorce or QDRO?  How do your programs
define family for FMLA purposes? What about expat tax equalization? Do your
programs change now that some of your employees have spouses?

Paul Chestovich of Maslon
discussed some of the SEC regulations that public companies must follow.
Beneficial ownership under Section 16 of the Securities Exchange Act of 1934
may now require you to report on newly deemed “spouses”. Paul mentions issues
with Rule 144, Forms S-8, accredited Investors and more. What about the
transactions performed prior to the ruling? What needs to be done? How do you
reach out to your staff and require them to give you information on spouses in
a way that is both efficient and non-invasive?

Many private companies
require a spouse to sign stock agreements for both purchased and awarded stock.
If an individual was married prior to the recent ruling, does this mean that
these forms may have been incorrectly completed?

Have there been transfers of
stock options that meet the spousal tax requirements? Do you have retirement
programs that allow spouses to participate, even pre-death? Do you have
employees working in a state where marriage is recognized and living in a state
where it isn’t? Will this impact who can be transferred within your
organization? I won't even get into insurance and benefit plans.

Obviously, there are far more
questions than answers right now. Luckily, July and August are traditionally
two of the slower months for compensation professionals. We have the time to
read, review, discuss, modify and make these plans work for our newly lucky
employees and for our already time-strapped compensation teams. 

What have you already done?
What do you still need to do? Let’s build a comprehensive list on the comments
section.

Dan Walter is the President and CEO of Performensation an independent compensation consultant
focused on the needs of small and mid-sized public and private companies. Dan’s
unique perspective and expertise includes equity compensation, executive
compensation, performance-based pay and talent management issues. Dan is a
co-author of “The Decision
Makers Guide to Equity Compensation”, “If I’d Only
Know That”, “GEOnomics
2011” and “Equity
Alternatives.” Dan is on
the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently
requested as a dynamic and humorous speaker covering compensation and
motivation topics. Connect with him on LinkedIn
or follow him on Twitter at @Performensation and @SayOnPay.