Business Up Front - October 2007

Business Up Front

IRS Regulations Affect Compensation Plans

The final IRS Section 409A regulations, which will become effective Jan.1, 2008, will impact hedge fund managers’ nonqualified compensation plans. The final regulations clarify several issues impacting fund managers, but subsequent guidance is still pending with respect to many issues. David Simonetti, senior manager in Grant Thornton’s compensation and benefits group, explained the issues addressed under the final regulations. Below is a brief overview of the final regulations:

• The impacts on partnerships were not addressed, but limited guidance provides that the grants of profits interests would be excluded from Section 409A.

• Back-to-back arrangements are permitted, assuming certain requirements are met.

• Management fees associated with “side pockets” or unredeemable and illiquid investments must be structured to avoid violating Section 409A.

• Specific timing of initial deferrals elections for newly established funds is required.

• Amendment dates for deferred compensation plans are required by Dec. 31, 2007.

SBA Scorecards for Federal Agencies

In an effort to increase the transparency and accountability in small business contracting, the U.S. Small Business Administration (SBA) released its first-ever Small Business Procurement Scorecard. The Scorecard will help agencies measure their achievements and progress in making contracting opportunities available to small businesses, improve the accuracy of contracting date regarding small businesses, and provide the public the opportunity to assess agencies’ performance in meeting these goals. Seven federal agencies met their small business contracting goals. SBA rates 24 agencies green, yellow or red, both on whether they reached their annual small business contracting goals and on their progress on efforts to make contracting opportunities available to small businesses. To achieve a green rating a federal agency has to meet its overall small business contracting goal, as well as the goals for at least three or four subcategories. Currently, seven agencies were rated green, five yellow, and 12 were red.

Holding Off on the Golden Years

For many workers, retirement will not mean an end to their careers. Only one in three workers polled said they plan to quit work entirely once they are already to retire from full-time employment, according to a recent survey developed by Robert Half Management Resources. The survey was conducted by an independent research firm and includes responses from 492 full- or part-time adult workers employed in office environments. Workers were asked, “When you are ready to retire, do you see yourself quitting work entirely, or taking one of the following options?” Their responses were as follows: 34 percent said they would quit work entirely; 24 percent would change fields; 14 percent would work as consultants; another 14 percent would work fewer hours for the same company; 2 percent would take a part-time job; 2 percent would not plan to retire; 1 percent would volunteer; and the other 9 percent responded other/unknown.

Telecommuting Gaining Ground

The proliferation of wireless technologies and Internet applications is making it easier for information technology (IT) professionals to work outside the office, according to a recent study. It includes responses from more than 1,400 CIOs from a random sample of U.S. companies with 100 or more employees. Nearly half of chief information officers surveyed said their companies’ IT workforce is telecommuting at a rate that is the same or higher than five years ago. For CIOs whose companies allow telecommuting 34 percent cited improved retention and morale through enhanced worklife. Increased productivity due to reduced commute time was cited by 28 percent of respondents. However, nearly half of all CIOs surveyed felt that quality of work suffers due to diminished in-person contact with colleagues. While telecommuting can benefit employers and employees alike, it’s important that companies have the appropriate infrastructure in place to facilitate staff who work on a remote basis.